If we talk about goals, then now gold has only one – to gain a foothold above $1,900.
The end of autumn 2020 will forever go down in the story of the Forex market. After several months of stagnation in the markets, a powerful upward impulse emerged, which sent all risky assets to multi-year highs, and in some cases to new historical highs. The rally took place amid a weakening US currency and euphoria over the successful trials of a coronavirus vaccine. At the moment, there is a slowdown in this trend. This is quite understandable: high growth rates cannot be sustained for a long time, despite the reluctance of market participants to notice any negative. By the way, for trading gold, we recommend brokers with a low spread per asset. AMarkets is one such broker.
The more highly profitable and risky assets grow, the more investors will start taking profits. At the same time, most of them will want to withdraw funds from the weakening dollar and transfer to a more reliable asset, for example, gold. So, in mid-December, the metal returned to the $1,900 area, although this peak is still out of reach for him. The metal would have broken through the $2,000 resistance long ago if its growth had not been constrained by the general positive on the market caused by the start of vaccination.
Optimism regarding Brexit remains another limiting factor for the metal. London and Brussels plan to sign a trade agreement before the end of the year. At the moment, key issues remain unresolved, however, the statements of the parties, and most importantly, their desire to go to the end, give investors hope that this political drama will end in the coming weeks.
New rally just around the corner
What are the prospects for metal at the end of 2020 and at the beginning of 2021? In our opinion, they are rosy. The main driver of the northern movement of the metal is the package of measures to stimulate the US economy, which American politicians have not been able to adopt for several months.
True, this saga may end even before the New Year. It became known this week that there has been progress in reaching an agreement in Congress, the amount of aid will amount to approximately $900 billion. Among other things, we are talking about direct payments to citizens and unemployed benefits. Republican Senator John Thune of South Dakota noted that the package includes assistance in the form of:
· Address payments in the amount of $600;
· Increase of paid weekly benefits to the unemployed by $300;
· Maintaining small businesses in the amount of $325 billion, of which $257 billion is provided for the payroll program.
Senate Majority Republican leader Mitch McConnell believes the project will be backed by both houses of Congress. The same is the opinion of the leader of the Democrats Chuck Schumer, who announced that in 2021 his party will seek to expand the state aid package after Biden’s inauguration.
New economic stimulus is fueling inflationary expectations in the US. Investors prefer to choose gold, trying to hedge against the risk of depreciation of the national currency. Many experts say that the dollar will continue to decline throughout 2021, and the total loss in value could reach 10%. In this regard, the decision of investors to trust gold is more than reasonable.
The news regarding the pandemic will also be a support factor for the metal. Yes, we have a vaccine, but its quantity is so minimal at the moment that it is not worth considering vaccination as a long-term positive factor. It will be months before drug manufacturers start mass production of the vaccine, and the vaccination itself will be put on stream.
In the meantime, the coronavirus is not going anywhere and will be reaping its harvest. The growing fear of new lockdowns may strengthen the position of gold buyers. There are already about 16 million cases of coronavirus infections in the United States, and in recent days the number of daily deaths has risen to 30,000.
Fears that new lockdowns will be introduced in the US in the near future neutralize some of the optimism regarding the stimulation of the US economy. In addition, the world’s economies will still have to deal with the logistics of delivering the vaccine. Delays in vaccine production or delivery, side effects – any such news will direct the cash flow towards gold.
For successful forecasting of the gold trend, we recommend using not only fundamental and technical analysis. Oscillators can show you the point of entry into the market, you can use the Cayman indicator of the online broker AMarkets for this. This tool will allow you to determine the market sentiment and understand in which direction the largest number of deals was opened, which means that the trader has the opportunity to trade against the crowd.
If we talk about goals, then now gold has only one – to gain a foothold above $1,900, but how quickly this happens depends on how soon the American congressmen adopt a new package of fiscal stimuli for the US economy.
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