Gold bulls with a clear focus on 1,800 USD – a break ahead?

By Admiral Markets

Source: Economic Events July 8, 2020 – Admiral Markets’ Forex Calendar

When looking at the price action in Gold, it may not be clear why a deeper look is worth our time. Well, we think, for several reasons, that we can expect a sharp move to be on the way.

While the precious metal has so far failed to substantially break above 1,800 USD, the stabilisation slightly below may surprise.

In fact, the Fed’s balance sheet shrank by another 163 billion USD last week, resulting in the third week in a row that the Fed saw a reduction here. While this might surprise at first glance, a deeper look shows what’s happening: the reduction results out of a continuing decline in demand for the US central bank’s USD swap lines from foreign central banks like the ECB, BoJ or BoE.

While the balance sheet reduction continues this week with 130 billion USD of FX swaps expiring, Gold traders and precious metal traders in general seem to prepare and anticipate a more aggressive approach from the Fed in the near future, most likely to happen once Equity markets start to see sharp volatility again.

Once this happens, chances become elevated that we get to see an attempt to break above 1,800 USD, then to the highest levels since 2012, levelling the path rather sooner than later up to the current all-time high around 1,920 USD.

Technically the mode on a daily time-frame in Gold stays bullish as long as we trade above 1,660 USD:

Source: Admiral Markets MT5 with MT5-SE Add-on DAX30 CFD Daily chart (between April 8, 2019 to July 7, 2020). Accessed: July 7, 2020, at 10:00pm GMT – Please note: Past performance is not a reliable indicator of future results, or future performance.

In 2015, the value of the DAX30 CFD increased by 9.56%, in 2016, it increased by 6.87%, in 2017, it increased by 12.51%, in 2018, it fell by 18.26%, in 2019, it increased by 26.44% meaning that after five years, it was up by 34.2%.

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