Gold Preserves An Opportunity To Grow

By the end of August 2017, Gold has risen to the highs reached in November 2016 due to the weakness of the US dollar. This fact, no matter which way you look at it, is the main reason why the price of the precious metal accelerated so fast. The highest level of August is $1331.90, and the fundamental picture suggests that it might be only the beginning.

The reputation of the American currency developed over the last 9 months is counting against it. After investors realized that Trump’s electoral campaign had nothing to do with the reality, their attitude and sympathies to the US dollar “faded away”. The US dollar was supposed to get stronger based on the tightening of the Federal Reserve’s monetary policy (the policy was tightened, but it didn’t work), the decreasing the Fed’s assets (no one still knows when this process is going to start, but it may work), and political and economic reforms implemented by Trump’s Executive Office (the most unlikely factor with bare possibility to get real). Moreover, the gap between the real numbers of macroeconomic indicators, such as the inflation, and expectations makes the Fed’s plans to increase the key rate in 2018 look very skeptical. If earlier everyone thought it was going to happen in March, then now it is expected to happen in June.

However, the worse for the dollar, the better for gold. This market rule is true like nothing else.

Apart from the correlation described above, there is a demand for gold. The world’s largest Central Banks’ demand for gold increased in spring, then got stabilized in summer, and may increase and support the prices again in autumn, when the weak spots of the global economies expose.

From the point of view of the technical analysis, gold has been trading inside the uptrend for the last couple of years. If the first micro cycle of this uptrend ended in December 2016, then right now the price is forming another bullish impulse. In the mid-term, the target of this uptrend may be the high of the previous cycle at 1375.13. In the long-term, the upside target may be a very psychologically-crucial level, 1500 USD for the troy ounce of the “sunny” metal.

XAU/USD Weekly Chart

In the short-term, the technical chart of the XAU may be described as a stable ascending tendency. After breaking this year’s previous significant highs and reaching a new one, the pair may start a correction. The closest support level and the target of the short-term correction may the previous high at 1296.06. If the market gets more pessimistic or some new information appear, the correction may become deeper and reach the support level of the mid-term ascending channel at 1233.14. A significant target on the resistance level of this channel may be at 1360, which will be an intermediate mid-term upside target.

XAU/USD chart daily RoboForex

Author: Dmitriy Gurkovskiy, senior analyst at RoboForex

DISCLAIMER: Forecasts presented in this section only reflect the author’s private opinion and should not be considered as guidance for trading. RoboForex bears no responsibility for trading results based on trading recommendations described in these analytical reviews.

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