Gold Prices
Gold price (XAUUSD) momentum is continuing a day after the price crossed the important resistance of $2,000. The price is trading at $2,035, which is a few points below yesterday’s high of $2040. Similarly, silver price is up by more than 2.45% while other metals like palladium and platinum are also in the green.
Gold price has jumped by more than 32% this year while silver has jumped by almost 50%. In the same period, the Nasdaq 100 has jumped by just 24%. Still, analysts believe that gold price will continue to rise.
A few months ago, we wrote about the audacious projection by analysts at Bank of America. In their note, the analysts predicted that gold price would surge to $3,000. At the time, that meant that gold would jump by 100%.
And, two weeks ago, we wrote of a highly-successful hedge fund who had predicted that the price of gold would climb to $5,000. Even at the current price, that is an audacious call.
And this week, analysts at Goldman Sachs lifted their outlook for gold prices to $2,300. In a statement yesterday, a Deutsche Bank analyst said that the price would climb to $2,100 in the immediate near term. In a statement, Goldman said:
“Combined with a record level of debt accumulation by the US government, real concerns around the longevity of the US dollar as a reserve currency have started to emerge, analysts said in a note dated July 28.”
All these analysts credit the surge in XAUUSD to several factors. First, they credit it to the overall weak dollar. They have a point in this considering that the dollar index has dropped by more than 10% in the past three months alone.
Another factor they are mentioning is the amount of liquidity in the market. For example, in the past three months alone, the Fed has created trillions of dollars in form of its open-ended quantitative easing.
Further, they note that the low interest rates have led to a sharp decline in real yields. As such, investors have more incentives to stay invested, rather than savings.
The weekly chart shows that gold price has been in a sharp upward trend. Although the upward trend has been there since 2012, it gained steam in 2019, when the 50-day EMA and 200-day EMA made a crossover. The RSI, which is an important oscillator, has climbed to a high of 80, which is the highest level since September 2019.
Also, the chart shows that XAUUSD has been rising for the past 9 consecutive weeks. And, the weekly bars and volume has continued to rise, which means that the upward trend will continue. On the flip side, a move below 1,767 will invalidate this trend.