After several months of a rally, gold prices went beyond strong physiological levels above $1830 per troy ounce, a maximum since 2011. This year alone gold has soared by 20%, and directed currency rates and the appreciation of precious metals.
This is related to several factors complimenting each other. Gold is rising as a safe haven asset amid investors’ fears concerning the spread of the pandemic. Risks of the second wave are turning more and more towards becoming a reality, manifesting itself in spikes of infections in the United States, Africa, Asia and South America.
On the other hand, the weakening U.S. Dollar, that has been depreciating since March 2020, is supporting yellow metal prices. The U.S. Dollar index fell to 96.5 points in July from its peak of 104 points in March.
All these events are stimulated by lose monetary policies put in place by the U.S. Federal Reserve and other major central banks around the world in recent months. Interest rates are decreasing as monetary injections into the global economy are being further implemented in order to bolster its growth. This not only serves to weaken the Greenback but also leads to a huge amounts of money in financial markets. Partially this money is being used for gold purchases. Such purchases are likely simulated by risks of rising inflation, and gold has always served as a hedge against rising prices.
This week the rally has halted due to high prices of the bullion. The above described processes are already priced in and most investors are just taking their profits, which leads to a correction in gold prices. Profit taking has led gold prices to fall below $1800 per troy ounce, and may pressure prices further within the area of $1780-$1810 per ounce and even to the $1740-$1760 strong support levels.
However, a mid-term upward trend for gold may be resumed. Technically speaking, another movement towards $1900 per troy ounce may be seen, which was the maximum level in September 2011.
Analysis and opinions provided herein are intended solely for informational and educational purposes and don't represent a recommendation or investment advice by TeleTrade.
Risk Warning: Trading Forex and CFDs on margin carries a high level of risk and may not be suitable for all investors. CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 72.72% of retail investor accounts lose money when trading CFDs with this provider. You should consider whether you understand how CFDs work and whether you can afford to take the high risk of losing your money. Prior to trading, you should take into consideration your level of experience and financial situation. TeleTrade strives to provide you with all the necessary information and protective measures, but, if the risks seem still unclear to you, please seek independent advice.
© 2011-2021 Teletrade-DJ International Consulting Ltd
Teletrade-DJ International Consulting Ltd is registered as a Cyprus Investment Firm (CIF) under registration number HE272810 and is licensed by the Cyprus Securities and Exchange Commission (CySEC) under license number 158/11.
The company operates in accordance with the Markets in Financial Instruments Directive (MiFID).
The content on this website is for information purposes only. All the services and information provided have been obtained from sources deemed to be reliable. Teletrade-DJ International Consulting Ltd ("TeleTrade") and/or any third-party information providers provide the services and information without warranty of any kind. By using this information and services you agree that under no circumstances shall TeleTrade have any liability to any person or entity for any loss or damage in whole or part caused by reliance on such information and services.
TeleTrade cooperates exclusively with regulated financial institutions for the safekeeping of clients' funds. Please see the entire list of banks and payment service providers entrusted with the handling of clients' funds.
Teletrade-DJ International Consulting Ltd currently provides its services on a cross-border basis, within EEA states (except Belgium) under the MiFID passporting regime, and in selected 3rd countries. TeleTrade does not provide its services to residents or nationals of the USA.