Fresh Breakout Levels For Gold

Precious metal prices have had a very strong year

Gold rose substantially above our year-end forecasts of USD 1,400 an ounce.

Gold prices were supported by a general shift in monetary policy of major central banks from tightening to a new round of easing, a decline in government bond yields, an increase in the amount of negative yielding government bonds, weakness in the Chinese Yuan, uncertainty on global growth and global trade front, and Brexit uncertainty.

The majorly influential factor for the yellow metal was the US China trade dispute. Almost the entire calendar year of 2019 stretched over this news for the global financial markets.

But this week we saw so many twists and turns regarding this matter.

First Trump entered in the fray. He dumped US China trade deal and said that it will happen only post US election in October 2020. The biggest losers over this news were DOW and US 10y and obviously the gold prices rallied and crossed$1475 which happened nearly after 4-5 weeks. (inversely proportional to the dollar)

But this was just not enough, when we saw a real example being set in the books of history at least pertaining to US china trade deal. On one side there was news that any trade dispute development will happen only after October/November 2020, while on the other hand there were news in the market on Wednesday that a US China trade deal will happen soon.

This uncertain news created a much ascertained volatility in the precious metals markets. This move is further expected to boost gold traders again fro lows. Once we saw the worst 1 decade monthly ADP jobs data reported at 67k a day. So its tight rope for these $1475-$1480 bracket on recent gold breakout. Once see a departure and sink below $1470 this will be extremely negative for the gold prices. However, till it survives $1470 broadly it’s headed for $1495-$1500.

In Prithviraj Kothari's opinion, Gold is expected to rally above $1480 and silver above $17.20. These can be considered fresh breakout levels.

We expect the US dollar to weaken modestly because of deterioration in longer-term fundamentals and weakness in near-term cyclical dynamics. Gold tends to rally when the dollar declines and we think this relationship will hold in the coming years.

Precious metal prices have rallied strongly. Long term outlook for gold is positive. But wait for a correction to position for higher prices.

Gold Remains RE-Committed

Gold has risen more than 13% this year mainly due to the trade dispute driving demand for safe assets

The policy U-turn by central banks suggests they do not have full command over the global economic situation. This, alongside an unpredictable White House, the rise of populism, de-globalisation, de- dollarization and questions over the future of capitalism itself, have led to a feeling of instability from which gold has certainly benefited.

But in these uncertain times, gold has once again proved its worth. It appears that gold has been one such haven investment and investors will also agree to this. Where on one hand the FTSE 100 index gained just 2%   over the past 12 months to mid October, on the other hand gold has gained 21% in the same time frame.

The recent strength comes after a wobbly few years for gold, which have seen it struggle to break above $1,350. Its rise coincides neatly with 2019’s falls in US interest rates.

In Prithviraj Kothari's opinion, After the thanksgiving note, there was a good positive opening mostly in Asian markets as China indicated that they are still in the fray of a deal with the US for this phase, deal to happen so beginning of the month is full of data pack from US and EU.

Further, there was a tense kind of situation in the EU wherein countries demanded their gold back.

Just a few short days after Poland’s government touted its economic might after completing the repatriation of 100 tons of the barbarous relic; and with Hungary's anti-immigrant Prime Minister Viktor Orban also ramping up holdings of the safe-haven asset to boost the security of his reserves; more Eastern European nationalist leaders are demanding their country's gold back on home soil.

The various leaders have a recent example to prove their fears right as the Bank of England refused to return Venezuela’s gold stock over political differences.

In spite of the geopolitical issues, gold price fell on Monday as investors turned to riskier assets on signs of economic growth following reports of an expanding Chinese factory sector and as a rising dollar reduced demand.

Spot gold was down 0.5% at $1,456.70 per ounce by during Mondays’ trading hours, having earlier touched it’s highest since Nov. 22. U.S.

Positive data released from the Chinese markets, unexpected expansion numbers in factory activities during November, led to a spur of investor in the equity markets as further positive releases were expected from other countries.

Any positive data released, creates optimism in the market thus giving confidence to investors who then move to riskier assets which in reduce the safe haven demand for the yellow metal.

Investor demand for gold was further pressured by the rising dollar, which makes dollar-denominated gold more expensive for buyers using other currencies.

Trade dispute between the United States and China has supported gold, with reports that a preliminary agreement has now stalled because of U.S. legislation supporting protesters in Hong Kong and Chinese demands that the United States roll back its tariffs as part of phase one deal.

Nonetheless, Gold has been the star performer of 2019, but does the gold rush have further to run?

The basics are still quite supportive, this lull is not going to last too much longer. Maybe into yearend we will see gold prices recommit the uptrend and is expected to trade between $1,450-$1,500.