Despite the negative news and worrying headlines, we recommend traders to make mental reframing of the situation. This way, you can look at the market from a different perspective. Let’s observe how you can take advantage of the uncertainties and make the fundamentals work for you!
Gold is near 1,700. What’s next?
Information is not investment advice
Gold has almost returned to its March high after the recent huge pullback. Little wonder, since the movement was supported by fears about the prolonged global recession because of the COVID-19.
Gold is a safe-heaven asset in the time of uncertainty. And indeed the current situation is very uncertain: more than 1.8 million people have been infected and nearly 115,000 have died.
According to UBS: “led by Fed easing, we now expect real U.S. interest rates to dip deeper into negative territory”. If interest rates go down, the gold price will increase as lower interest rates will make stocks and bonds less attractive for investors.
Let’s look at the daily XAU/USD chart. After the huge decline from 1,693 to 1,473 during ten days, the gold price rebounded its position. Now it’s heading toward the 1,700 mark. The most probable scenario is bullish as it almost breaks through the resistant line of 1,693. Also, gold is one of those assets that trend really strongly. However, short contractions might be on the way up. Support lines are at 1,641 and 1,600.
Also if we look back at the 2008 crisis. The gold price was going up for a really long time. The economical situation these days is quite similar.
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