Gold heads for $1600
|The gold price has taken a breather over the last few days after rallying more than $100 dollars in the space of 2 weeks and some see the pause as temporary with the $1600 mark now firmly in reach.
Gold did find some resistance at the $1500 mark before finally breaking through and now this level has turned into a solid support base which will be the catalyst for the next upward movement.
Apart from strong technical levels, the news that will drive gold higher will be the uncertainties surrounding the issues in Hong Kong, as well as the Brexit mess and the ongoing trade dispute between the US and China.
“Gold has breached critical resistance levels and the momentum is skewed to the upside”, said Peter Hug, global trading director of Kitco Metals.
“I’m very constructive this gold market. There’s just a lot of issues in the market. Ignoring the Chinese tariff issue, which is obviously a big issue, we have the Italian banks that are in serious financial trouble…you’ve got the issue with Hong Kong and China, so there are just so many macro issues out here that suggest that you do not want to be not in the gold market. Any kind of pull back is a buying opportunity” he added.
There are fears now that the US economy may be headed for a recession going in to 2020 and this is evident by the US yield curve which is currently inverted.
This is on top of prediction that some central banks around the world such as the ECB and Bank of England are gearing up to lower interest rates which is only going to add to the attractiveness of gold.
“The US yield curve is a key factor that seems to be driving the upmove in gold prices. This is something similar to what we saw during 2008-09," said Debajit Saha, senior precious metals analyst at Thomson Reuters GFMS in India.
“Currently, the US yield curve is inverted and more easing by the central banks would make gold an attractive asset. An inverted yield is seen as a sign of recession, which means safe haven demand for gold should rise."
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