XAU/USD market mood: Gold should benefit in a low-interest rate world [Video]

Giles Coghlan LLB, Lth, MA Financial Source

Listen to the latest market mood for the XAUUSD.

Gold has a number of factors supporting it at the moment.

Firstly, the Federal Reserve kept interest rates unchanged near zero and indicated that they would stay there for at least three years. It also cautioned that the pace of economic activity would likely slow after ‘the recovery has progressed more quickly than generally expected.

Secondly, Gold-backed ETF"s and similar products recorded their ninth consecutive month of inflows in August. Gold ETF's added 39 tonnes during the month the equivalent of $2.2 billion under asset management. Thirdly, the bank of England showed a willingness to move towards negative interstate rates and money markets now have them moving negative in February 2021. This confirms what we already know that interest rates are low around the world.

Therefore, in a low-interest rate world, gold should benefit. Technically gold has formed a large bullish symmetrical triangle pattern and buyers will have stops sub $1900 looking for recent highs as a first target.

Trade Risks:

A quick US economic recovery where rates are seen rising more quickly
Hawkish comments from the Fed which strengthen the dollar
Dollar strength

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Author

Giles Coghlan LLB, Lth, MA

Financial Source

Giles is the chief market analyst for Financial Source. His goal is to help you find simple, high-conviction fundamental trade opportunities. He has regular media presentations being featured in National and International Press.

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