If we talk about goals, now gold has only one – to consolidate above $1,900.
The end of autumn 2020 will forever remain in the history of the Forex market. After several months of stagnation in the markets, a strong upward impulse appeared that sent all risky assets to multi-year highs, and in some cases to new historical highs. The rally was held amid a weakening US currency and euphoria over successful trials of a vaccine against the coronavirus. At the moment there is a slowdown in this trend. This is quite understandable: high growth rates cannot be sustained for long, despite market participants’ reluctance to see any downside. Otherwise, we recommend brokers with a low spread per asset for gold trading. AMarkets is one such broker.
The more highly profitable and riskier assets rise, 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 them to more reliable assets, for example, gold. Thus, in mid-December, the metal returned to the $1,900 area, although this peak is still out of reach. The metal would have broken the $2,000 resistance a long time ago if its growth had not been limited by the general positivity in the market caused by the start of vaccination.
Brexit optimism remains another limiting factor for the metal. London and Brussels plan to sign a trade deal before the end of the year. At this point, key issues remain unresolved, but statements from the parties, and most importantly, the desire to see things through, give investors hope that this political drama will end in the coming weeks.
A new rally is just around the corner
What is the outlook for the metal in late 2020 and early 2021? In our opinion, they are pink. The main driver of the northward movement of metals is a package of measures to stimulate the American economy, which American politicians have not been able to adopt for several months.
True, this saga may end before the New Year. This week it became known that progress has been made in reaching an agreement in Congress, the amount of aid will amount to about 900 billion dollars. Among other things, we are talking about direct payments to citizens and benefits for the unemployed. Republican Senator John Thune of South Dakota noted that the package includes assistance in the form of:
· Address payments in the amount of $600;
· Increasing weekly unemployment benefits paid by $300;
· Small business maintenance of $325 billion, of which $257 billion is earmarked for the payroll program.
Senate Republican leader Mitch McConnell believes the project will be supported by both houses of Congress. The same is the opinion of Democratic leader Chuck Schumer, who announced that his party will seek to expand the state aid package in 2021 after Biden’s inauguration.
New economic stimulus boosts inflationary expectations in the US. Investors prefer to choose gold, trying to protect themselves from 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.
Pandemic-related news will also be a supportive factor for the metal. Yes, we have a vaccine, but its quantity is currently so minimal that it is not worth considering vaccination as a long-term positive factor. It will be months before drug manufacturers begin mass production of the vaccine, and the vaccination itself is put into operation.
In the meantime, the corona virus is not going anywhere and will reap its harvest. The growing fear of new blockades may strengthen the position of gold buyers. In the United States, there are already about 16 million cases of infection with the coronavirus, and in recent days the number of daily deaths has risen to 30,000.
Fears that a new blockade will be introduced in the USA in the near future neutralize part of the optimism regarding the stimulation of the American economy. In addition, world economies will still have to deal with the logistics of vaccine delivery. Delays in the production or delivery of vaccines, side effects – any such news will direct the flow of money to gold.
For successful gold trend forecasting, we recommend using not only fundamental and technical analysis. Oscillators can show you the point of entering the market, for this you can use the Cayman Indicator of the online broker AMarkets. This tool will allow you to determine the mood of the market and understand in which direction the largest number of trades are open, which means that the trader has the opportunity to trade against the crowd.
If we talk about goals, then gold now has only one – to consolidate above $ 1,900, but how quickly this will happen depends on how quickly US congressmen pass a new fiscal stimulus package for the US economy.
Catch the bullish trend in 2021 with AMarkets! Claim your New Year bonus today and get extra privileges and benefits for 2021.