There are good reasons to be bullish on gold. A strong seasonal pattern for January, with gold rising 7 years in a row during that month and low interest rates around the world are generally supportive of gold heading into year end. The approach of the Chinese lunar New Year, which prompts physical purchases of gold, generally supports gold at the start of the year.

Japan

On top of this the catalyst of potential safe haven demand on a US-China trade deal breaking down is the trigger that will send gold soaring into year end and the month of January. I hope it doesn't happen, for global growth's sake, but it would be a bullish case for gold. I would also expect a tweet from President Trump to throw the whole trade deal into question. That is the US President's pattern. It was the way that President Trump handled the USMCA deal and it is the way I expect the Us-China trade negotiations to continue.

However, it is good to keep things in balance, so what about the bearish reasons for gold? Here are a few factors that will weigh on gold going forward into 2020

  1. The message from around the world’s central banks has been that monetary policy is dead; long live fiscal policy. Mario Draghi closed his chapter as ECB president with this very message. This means support for the economies around the world is moving from the central bank's domain (monetary policy) into the Government's remit (Fiscal policy). Fiscal policy is expected to lead to higher interest rates (and this will weigh on gold's appeal in a low interest rate world).

  2. If the US-China phase 1 trade deal optimism picks up speed and we head towards phase 2 with, dare I say it, gusto and enthusiasm then gold's risk haven appeal weakens. This would result in gold weakness

So, there we have it - the bearish case for gold which is just the flips side of the bullish case really. Worth bearing in mind for your gold playbook as we approach January 2020. A stop underneath $1440 for gold longs will be an obvious choice for those positioning themselves for any further gold strength from here.

XAUUSD

 


 

Learn more about HYCM

 

High Risk Investment Warning: Contracts for Difference (‘CFDs’) are complex financial products that are traded on margin. Trading CFDs carries a high degree of risk. It is possible to lose all your capital. These products may not be suitable for everyone and you should ensure that you understand the risks involved. Seek independent expert advice if necessary and speculate only with funds that you can afford to lose. Please think carefully whether such trading suits you, taking into consideration all the relevant circumstances as well as your personal resources. We do not recommend clients posting their entire account balance to meet margin requirements. Clients can minimise their level of exposure by requesting a change in leverage limit. For more information please refer to HYCM’s Risk Disclosure.

Feed news Join Telegram

Recommended Content


Recommended Content

Editors’ Picks

EUR/USD recovers modestly, trades below 1.0700

EUR/USD recovers modestly, trades below 1.0700

EUR/USD has recovered modestly after having dropped to a fresh daily low below 1.0650 in the early American session. With Wall Street's main indexes trading in positive territory, the dollar is struggling to continue to gather strength before the Fed publishes the May minutes.

EUR/USD News

GBP/USD reclaims 1.2500, erases daily losses

GBP/USD reclaims 1.2500, erases daily losses

GBP/USD has regained its traction in the second half of the day and advanced toward the 1.2550 area. The improving risk sentiment seems to be limiting the dollar's gains and helping the pair push higher ahead of FOMC Minutes.

GBP/USD News

Gold retreats to $1,850 as US yields rebound

Gold retreats to $1,850 as US yields rebound

Gold has turned south in the American session and retreated to the $1,850 area. The benchmark 10-year US T-bond yield recovered into positive territory following an earlier decline, causing XAU/USD to stay under bearish pressure.

Gold News

Terra’s LUNA fork could happen tomorrow, here’s how you need to prepare

Terra’s LUNA fork could happen tomorrow, here’s how you need to prepare

Terra’s LUNA 2.0 testnet is now live, the snapshot could happen on May 26 and the mainnet launch is expected to occur as soon as Friday, May 27, thus completing the LUNA fork.

Read more

FXStreet Premium users exceed expectations

FXStreet Premium users exceed expectations

Tap into our 20 years Forex trading experience and get ahead of the markets. Maximize our actionable content, be part of our community, and chat with our experts. Join FXStreet Premium today!

BECOME PREMIUM

Majors

Cryptocurrencies

Signatures