• Despite breaking to an 8.6-year high gold could only end this week 1.22% higher.
  • The precious metal looks set to test the all-time highs at $1920.94 per ounce.

Fundamental backdrop - Lots of data next week.

It was the drop in the dollar and mixed sentiment in stocks that sent gold to an 8.6-year high this week. Recently when the coronavirus pandemic situation gets worse then the US dollar gets strong but this seems to be a more localised problem for the US. The UK and EU seem to have a much better grasp of the situation and this led the dollar to weaken. Recently the UK added more fiscal stimulus too and since then the pound has outperformed. The more monetary stimulus gets added the strong gold will become but we would need an environment where stocks stall and the dollar weakens to see another push to the all-time highs. Everything in the financial markets moves in ratios so this could just be a slow grind but one thing is for sure we need to keep an eye on the Fed. 

Next week there are lots of important data announcements. The ECB and BoC will be announcing their latest rate decisions and policy measures. The key in these events is forward guidance. Both of these central banks are not projected to move on rates. But if there is any indication that more stimulus to be added it could make a difference. There is also the latest GDP readings from the UK and China. The Chinese GDP reading will be important for global risk sentiment. If the reading is poor then there could be a flight to safety and maybe gold will benefit. 

FX Calendar Mon - Wed

FX Calendar Thurs - Fri

Technical Picture - Will USD 1800 per ounce hold?

On the gold weekly chart, you can see the price has stalled at the 138.2% Fibonacci extension. The market is due a correction and looking at the Relative Strenght Index there is a big divergence. This means there could be a move lower or a retracement in this uptrend. The USD 1800 per ounce level is a strong resistance and it would not be a massive surprise if the market has a rest from the relentless uptrend.

Gold Weekly Chart

The Gold/Silver ratio shows that it could be silvers time to shine. As you can see from the chart below the price might break out to the downside. This could mean the rate of change against the US dollar. The MACD has dropped below the zero level and the histogram is now in the red. The signal lines also remain under the mid-point so all signals are pointing to silver outperforming its big brother.

Gold Silver Ratio

Forecast Poll - XAU/USD

The one-week forecast poll shows traders are still pretty bullish and think the price could extend further past the USD 1800 per ounce level. Looking further ahead, the pollsters believe think we are at the right levels at the moment. Interesting that in the longer-term measurements not many traders believe the precious metal will move sideways but the forecast price is close to the current level.

Gold Forecast Poll Results

Links to other gold-related articles

Surge in coronavirus spooks investors as China takes profits

Is the ‘party’ in gold just getting started?

 

 

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