- Summary:
- Gold price could hit between $2,000 and $2,300 in 2021, according to projections from ANZ, CIBC and TDS Securities. See their XAUUSD outlook.
Following the steep drop in the price of the XAUUSD asset in the financial markets on Monday and Tuesday, gold price has stabilized above the $1800 price level as sellers decide to take a breather this Thanksgiving holiday. $1800 continues to remain the price to beat for sellers.
However, three banks have forecast that gold price may trade much higher in 2021. ANZ Bank is projecting a gold price target of $2,100, while TDS and CIBC are also projecting gold price moves towards $2,000 and $2,300 respectively.
Why are these institutions projecting an advance in gold price despite the present environment that tilts towards risk tolerance?
The answer lies in the US Dollar and real interest rates. The low-interest environment, coupled with additional stimulus packages as part of quantitative easing, is expected to continue into 2021, coating the markets with USD-negative sentiment. The forecast of the US Federal Reserve for inflation and interest rates do not support rates going up anytime soon. In fact, ANZ sees the possibility of real rates extending into negative terrains.
ANZ Bank, therefore, projects a price of $2,100 next year, if three conditions are met:
- Long-term US bond yields staying around 1.6%.
- USD index dropping to 90 or below.
- A rise in US CPI to 1.7%.
However, ANZ recognizes that the short-term sentiment for gold price is bearish, with rising stock prices and subsequent shift in investment flows from funds that are gold-backed into the stock market. ANZ projects a gold price target of $1900 per ounce as its 3-month target.
Technical Levels To Watch
What we see on the XAUUSD daily chart is the short-term outlook for gold price, which tends to align with the ANZ 3-month picture. It would be good to know what gold price is doing before it targets the projections of the banks (which remains conditional).
For now, we see that the pinbars of Wednesday and Thursday has helped gold price off the lows at $1800. This support level was identified as the price to beat for sellers in my analysis of the asset yesterday.
The recent stall in prices meets the technical expectations of the measured move from the bearish flag. It has to take a break below this support level to bring in new downside targets at 1788.90 and 1762.51 into the future.
As per the long-term outlook for the banks, it has to take bulls sustaining the price above 1800.34 (site of the 200-day moving average support) to keep alive the chance to retest and probably surpass the 2020 high at 2075.44. However, this is a medium-term/long-term outlook that requires gradual navigation above resistance levels at 1850.78, 1869.39, as well as 1900.76. Other targets are found at 1954.77, 1969.95 and 1980.75, in that order.
XAUUSD Daily Chart
