As Worries About Covid
With gold down 11% since the August peak through mid-December, its time to wonder whether this is the pause ahead of more gains or the end of the phenomenal bull run.
My take: Its the latter and you should avoid goldGLD GC00. The yellow metal had its heyday in 2020 as a fear factor trade on deep worries about COVID-19 and a crumbling economy.
What To Watch For
Milling-Stanley expects gold to exceed $2,000 by the end of the year and he is not convinced the Fed will raise rates even if inflation climbs in subsequent years. Adding that President Bidens multi-trillion-dollar infrastructure programs will lead to rising deficits, interest rates will have to remain low. Contrarily, Lloyd expects gold to finish the year at $1,700. Radomski, however, expects gold to keep declining over the next several months, sliding to as low as $1,500 or even lower and then recovering to the $1800 range by year end.
Golds Only Significant Selloff Occurred Just After Its Biggest Bull Market In Modern History
Gold rose more than 2,300 percent from its low in 1970 to the 1980 peak. So it isnt terribly surprising that it fell with the broader stock market at that point. In recent years, the situation has been the exact opposite. Gold endured a 45 percent decline from its 2011 peak to its 2016 low, which was one of its worst bear markets in modern history. At the same time, this isnt entirely a shock either, given its quick gains during the 2008 crisis and the 2011 crash.
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Gold Price Forecast 2021 Underway
Ed. note: This is paragraph was added on November 8th, 2020.
This bullish scenario might make the gold market the most attractive market in the first months of 2020! We identified the bullish breakout level to be 1530 USD. Last night, gold convincingly crossed this level and now trades in a higher area of this new rising channel.
We believe the grey channel on below short term gold chart will be the dominant pattern for the first months of 2020. This is pretty bullish. It also points to a gold price target of $1,715 which comes very close to the projected $1,750 for 2020 which we forecasted many months ago.
Ed. note: to known when we believe it is time for gold and/or silver trades.
Chart update: 11.08.20
Investors Shouldn’t Panic Over An Initial Drop In Gold Prices
Youll recall that gold did fall in the initial shock of the 2008 financial crisis. This recent, albeit memorable, instance is perhaps why many investors think gold will drop when the stock market does. But while the S& P continued to decline, gold rebounded and ended the year up 5.5 percent. Over the total 18-month stock market selloff, gold rose more than 25 percent. The lesson here is that, even if gold initially declines during a stock market collapse, one should not assume its down for the count. In fact, history says it might be a great buying opportunity.
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Gold Futures Settle 5% Lower For The Week
Gold futures were down by more than 3% on the week.
Gold prices have been acting a bit strange lately, with the haven metal plunging in the face of a dive in global stock markets hit by the spread of COVID-19 and its impact on the economy in China and around the world.
The precious metal usually finds support as a drop in the stock market tends to lift the haven appeal of gold, with benchmark stock indexes in the U.S., Europe, Asia, Canada, the Middle East and Latin America suffering losses for the week.
This time around, however, given the steep stock-market declines, gold has become the asset of choice among investors to generate cash. Investors are selling anything with a bid and running for cover, and that includes typical hedges like gold, said Brien Lundin, editor of Gold Newsletter.
We saw similar behavior during the 2008 financial crisis, however, and once investors understood and appreciated the scope of central bank stimulus coming down the pike, they began buying gold, he said. The price more than doubled from the lows thereafter.
On Friday, the most-active April gold futures contractUS:GCJ20 settled at $1,5866.70 an ounce, down $75.80, or 4.6%, for the session. It saw a weekly loss of about 5%, the sharpest decline since week ended Nov. 11, 2016. Prices fell 1.3% from the end of January.
In the U.S., the Dow Jones Industrial AverageDJIA,
Why Is Gold Going Down So Much
Why is gold going down so much?
Does any one know?
- count placeholder0
Gold going down
Take a look at the 5 or even 10 year graph of gold and it should alay your concerns. Gold was due for a correction. It got too far above its moving average. If it went higher it may have crashed and burned. As it is, this correction should be welcomed by long time investors. Yes its annoying not knowing when exactly to get out and back in, so just stay in and dont look at the graph if it stresses you out too much. I think we have now, more or less, corrected . I just bought some more. To me silver also looks a great buy at the moment. With negative real interest rates, this bull has a few more years in it.
Thu, Aug 25, 2011 – 01:18pm
May be I should go get some
May be I should go get some silver.
What do you mean whey you say it could have crashed & burned?
Thu, Aug 25, 2011 – 02:13pm
Im no financial guru, but.
I was reading yesterday that gold came down because China hiked gold margins 27%. I have no idea what that means, I just saw it in print, on a couple of different sites The people writing this were saying it wasnt because of the news on durables, or because someone was dumping their investment, gold came down due to the “margin hikes” of CME.
For the record, we did buy some yesterday, just in case Fridays Fed announcement causes gold to soar to new heights.
Re: Why is gold going down so much?
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What It Means To You
Between 1979 and 2004, gold prices rarely rose above $500 per ounce. The rise to record highs in 2011 was a result of the worst recession since the Great Depression, and the 2020 records were due to the COVID-19 pandemic.
Most financial planners advise that gold comprise 10% or less of a well-diversified portfolio. If you’re holding more than that, talk to your financial advisor before gold falls again.
Customs Duty Cut On Precious Metals
The first reason for gold prices to easing in India is Union Finance Minister Nirmala Sitharamans move to cut the customs duty on the yellow metal to 7.5 per cent from 12 per cent.
However, the Government has decided to impose agricultural and infrastructure development cess on gold imports, taking the total levy to a tad over 10 per cent.
Import duty cut is a reason why gold prices are declining, said Indian Bullion and Jewellers Association National Secretary CA Surendra Mehta.
The second reason for gold to head south is the appreciation of the rupee against the US dollar.
Over the last few trading sessions, the Indian rupee has been gaining against the dollar. It has recovered by 0.63 per cent in the past month to 72.73 to the Greenback on Thursday.
Usually, gold tends to drop when the rupee gains since the US dollar to buy it from abroad is lower.
The appreciation of the rupee itself has lowered the prices of gold by 700-800 , said Mehta.
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The Longest Gold Price Chart
Below is the 50 year gold price chart. This a quarterly chart so it is meant to read the most dominant trends.
We believe this chart contains a wealth of insights. It is especially useful for our gold price forecast for 2020 and 2021.
Lets review the insights we derive from this gold price chart, and how it is useful for our gold prediction:
All that said we do expect a steady rise back to all-time highs but obviously a break to new highs will not take place in 2020 nor in 2021.
Give the gold market the time it needs. Buy the dips, slowly accumulate. This horizontal breakout is something we have seen before, and it is strongly bullish. It is the basis of our gold forecast for 2020 and beyond 2021.
Chart update: 11.08.20
Leading Indicator: Gold Cot
The way to understand this indicator is that it signals a bottom or top when hedge funds have extremely low or high positions. The shape of the subsequent change in net positions is what helps understand whether there is a bull market or bear market in the price of gold.
When it comes to the gold COT report we look at extreme net positions of non commercials. Every time non commercials are approx. 300,000 contracts net long it tends to signal a major peak in golds price.
Thats the same level we see at the time of writing. This indicator has to come down in other words.
When it comes to interpreting what it means for the big picture trend when golds price turns up we have to look at the level of net long contracts by non commercials. There are 2 potential scenarios, each with an important implication:
Everything we explained in this section should be reflected in the center panel of the first chart.
Chart update: 11.08.20
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Confirming Indicator For : Gold Vs Tip
Lets revise the 3 gold price leading indicators outlined in our gold price forecast: golds COT, the inverted gold / USD correlation and the inverted gold / interest rates correlation.
All 3 of them have a certain level of reliability, and all of them help understand the future gold price direction in a different way. They should be interpreted in a complementary way, and the word that stands out here is interpretation.
Now we can get the help of a confirmation indicator. It is the TIP ETF . This supports our gold price forecast as it is directly correlated to golds price.
However, TIP ETF is not a leading indicator for golds price.
So TIP ETF should be considered together with the 3 other leading indicators. Yes, thats how complex it is to forecast gold prices. It goes beyond what you tend to read in media.
Chart update: 11.08.20
Most Influential Political Events In 2021 For Xau/usd
Despite the liquidity flooding the financial markets, inflation outlook in major economies remains subdued and major central banks voiced their commitment to keeping their policies extremely loose until they see a convincing increase in price pressures. This suggests that investors will not give up on gold in the near future.
On the other hand, a return to normality with mass COVID-19 vaccinations could make risk-sensitive assets more attractive, especially in the second half of 2021, and dampen the demand for the yellow metal.
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The Role Of Perception
More than any other commodity, the price of gold rises mainly because everyone thinks it will. For example, people believe that gold is a good hedge against inflation, and as a result, they buy it when inflation rises. There is no fundamental reason that gold’s value should increase when the dollar falls. It’s simply because everyone believes it to be true.
Three years after gold hit its 2011 peak, it fell by more than $800 per ounce. It dropped to $1,050.60 per ounce on December 17, 2015, and rose to $1,300 an ounce by the end of 2017 because the dollar weakened. There was no inflation, and the stock market was setting new records. These are both historic drivers of rising gold prices. It was only the perception of possible inflation, due to the dollar’s decline, that sent gold prices higher.
Gold Sinks As Us Central Bank Turns Hawkish
Gold climbed from $1,686 per ounce in late March to $1,909.90 on 2 June, reversing a decline seen in JanuaryMarch and recording a small gain from the $1,883 per ounce level at which it started the year. But the trend of gold price rises came to a halt in response to rising US employment figures and comments by Philadelphia Federal Reserve President Patrick Harker that policymakers should begin considering when to taper bond purchases.
The precious metal, which is considered a hedge against inflation and economic uncertainty, dropped by 4.7% to $1,774.80 per ounce on 16 June, its lowest level since late April. The pullback came after a statement from the Federal Open Market Committee sounded an optimistic note on the recovery of the US economy.
Progress on vaccinations has reduced the spread of COVID-19 in the United States. Amid this progress and strong policy support, indicators of economic activity and employment have strengthened, the statement said.
Fed chairman Jerome Powell also indicated that the central bank would begin discussing tapering bond purchases.
Gold slipped further to $1,769 per ounce on 17 June and has since remained below $1,800 per ounce. There were further signs of economic recovery as data on US durable goods released on 24 June showed strong growth. New orders for manufactured durable goods increased by $5.7bn to $253.3bn, a 2.3% increase after a 0.8% decline in April.
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Gold Prices Fall Sharply Should You Start Buying Now
2 min read.Asit Manohar
- Sharp fall in gold price is due to the US Fed’s announcement to hike interest rates twice in 2023 and the US Dollar gaining strength against major global currencies, say experts
Gold price in the last one week has crashed over 2000 per 10 gm at the Multi Commodity Exchange . According to the commodity experts, weakness in the yellow metal price is due to the US Fed’s announcement to hike interest rates twice in 2023 and the US Dollar gaining strength against major global currencies. However, they maintained that the precious metal price crash is temporary and gold investors should see this dip as a buying opportunity. The bullion experts went on to add that gold price will soon rebound and go up to 48,500 per 10 gm in one month after the trend reversal.
Speaking on the reason for gold price crash Anuj Gupta, Vice President Commodity & Currency Trade at IIFL Securities said, “This gold price crash can be attributed to two major reasons US Fed announcement to hike interest rates twice in 2023 and the USD gaining strength against the major global currencies including Indian National Rupee . The optimistic view of US Federal Reserve on the US economy led to sharp rise in the bond yield as well.”
In the current market situation NS Ramaswamy, Head of Commodities at Ventura Securities Ltd is expecting gold price to go up to 45,500 per 10 gm at MCX.
Gold Price Forecast: Can The Market Return To $2000
The gold price remaining below $1,800 per ounce indicates a lack of an immediate impetus to buy the yellow metal, analysts at Canadian bank TD Securities said in a note on Thursday, as the Fed clarified its reaction function with respect to an upside scenario in inflation, which suggests the Fed isn’t behind the curve by any means.
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But the analysts added that pricing in rates markets is also too hawkish, with a first hike priced for December 2022, which is also inconsistent with the Feds message.
The TD Securities analysts slightly revised down their gold forecast on 24 June, expecting prices to slide in the third quarter before turning higher later in the year and into 2022.
Ole Hansen, analyst at Dutch bank Saxo noted that although the dot plot is not signalling any rate hikes before 2023, the fact the Fed suddenly signalled willingness to consider tightening was something the non-yielding investment metals struggled to deal with and as a result gold, already on the defensive after getting rejected above $1900, broke down through several key technical support levels.
Carston Fritsch, commodities analyst at Germanys Commerzbank, that the combination of a noticeably firmer US dollar and higher yields poses quite a burden for gold. Whether it justifies a price slide on this scale is another matter, however.
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How Pandemic Has Affected Gold Prices
The restrictions imposed by governments have caused temporary closures of mines. Lack of supply and transportation have an overall impact on the pricing. Among other world crises, Covid 19 has seen the largest surge in gold prices. After the first covid case in China, the annual demand rose by 38%. Following the Covid-19 crises, there is greater uncertainty in the global market and has propelled the gold prices.