Price of Gold Fundamental Weekly Forecast – Longs Could Abandon Ship if Yields Continue to Rise
Gold ended an uneventful week lower after posting largely range-bound trade as investors continued to seek a bullish catalyst to push prices up. Many of them are starting to realize that gold is an investment that competes with stocks, bonds, and currencies, or basically any asset that pays investors to hold. In addition, gold bulls may begin to see that fundamentals are changing and that the promise of increasing fiscal and monetary stimulus may not be enough to raise prices.
Last week, February, Comex Gold hit $ 1,829.90, down $ 5.50, or -0.30%.
Trying to trade the headlines has been a problem for gold traders, especially when brokers tell Newswires that gold is rising due to the "safe haven buy". What does that mean anyway? We have seen over time that the US dollar, government bonds, and the Japanese yen are real havens. Gold feels like a safe haven at times, which may confuse investors, but I think it is a financial investment at the moment. I mean, where do you think the money that started the stock market surge in early November came from?
We saw last week that vaccine distribution issues, rising coronavirus cases, weaker economic data, and a low-key tone from the Federal Reserve chairman couldn't fuel a rally in gold. And why was that so? Rising government bond yields and demand for safe havens for the US dollar.
Rising yields are likely to be the top concern for gold investors at this point, as the February futures contract at $ 1780.50 is just above 50% of the March-August rally last year. This is likely to be the key level that will determine the direction of the market in the short term.
Buyers could take a test for $ 1,780.50 this week. This is because it provides value to investors. The actual support zone consists of the 50% level at $ 1780.50 and the 61.8% level at $ 1705.20. On November 30th, buyers came in at a price of $ 1,767.20 which helped fuel a rally of nearly $ 200 in about 30 days.
Will they come back between $ 1,780.50 and $ 1,705.20? I think so, but will we see another extended rally? I'm not confident this will happen unless we break the long bottom spike pattern. In addition, ten-year government bond yields would have to fall below their December lows to create enough upward momentum in gold. And that would happen if economists predicted a recession in 2021.
In our economic calendar you will find all economic events of today.
This article was originally published on FX Empire
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GC = F.
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