Gold Prices
Gold price (XAUUSD) is bouncing back, a day after it dropped by more than 3%. The decline yesterday happened after the Federal Reserve released its minutes for the previous meeting. The minutes led the US dollar to rise against most currencies and the price of gold, silver, and copper to fall in overnight trading.
Gold price has been in an sharp uptrend in recent months, rising from a YTD low of $1447 to an all-time high of more than $2,000. However, in recent days, the price has found strong resistance as investors question whether the bull thesis is still intact. For example, last week, the price fell from a high of $2030 to a low of $1,900.
Even with the current volatility, some analysts still believe that the price will continue rising because of the lower yields in the US economy. For example, analysts at Bank of America still expect that gold price will continue rallying to about $3,000 in the near term. Other analysts believe that the price will rally to $5,000.
In an interview with Bloomberg yesterday, Troy Gayeski, a portfolio manager at SkyBridge Capital said that gold price will continue rallying mostly because of currency debasement. He said that while while the XAUUSD pair has got a bit overvalued, it has not appreciated as much as money-supply.
For example, US debt has increased by more than $3 trillion in the past three months. And with congress talking about more stimulus, there is a possibility that it will grow by an addition $1 trillion. He expects the price to remain between $2,100 and $2,200 in the next year. He said:
“When you think of currency debasement the question is, what is the dollar going to weaken against, and when you look around the globe, it’s hard to be excited about alternative currencies.”
The weekly chart below shows that gold price has been in a strong upward trend. However, the price has found some strong resistance after reaching the $2,000 psychological level. Still, the chart shows that the price has a history of finding strong resistance whenever it reaches a major psychological level. This is evidenced by the pink rectangles. Therefore, the price is likely to continue rising in the near term.
On the flip side, a move below $1,800 is likely to bring jitters among some bulls and invalidate the bullish trend.
