Gold

Delayed - 10/22 11:03:29 pm
1487.7USD
+0.24%

Gold: and in the end, it is gold that benefits

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08/07/2019 | 04:00 am
Opinion : Bullish above 1340 
Target price : 1540 
Gold prices continue to rise to new highs not seen since April 2013 and are now at the 1500 USD level. As such, the course achieved since the beginning of the year is remarkable, with gold appreciating by more than 15% since 1 January and by nearly 22% year-on-year.
This performance is obviously attributable to the fall in bond yields, fuelled by the easing of the Fed's monetary policy, which forced it to lower its key rates by a quarter of a point, the first since 2008. It is not without recalling that the world's main central banks are engaged in the same process of monetary support, such as the ECB, which is working to anchor market expectations towards new accommodating measures, or the BoJ, which is not ready to put an end to its ultra-accommodating policy. Consequently, "risk-free" yields are sinking into negative territory, making the barbaric relic mechanically more attractive, since the latter by definition does not issue any yield, no coupon, and has the additional advantage of not being backed by the debt of any State.

The insistent theme of the trade war also contributed to the improvement of gold metal prices. This is intensifying and tends to take on a new face towards a currency war, thus increasing friction between Washington and Beijing. In this context, operators aspire to greater security and remain inclined to cover their long-term exposure with safe haven values. Gold demand reached a three-year high in the first half of 2019, driven by demand from central banks and financial investors according to World Gold Council data. Over the first six months of the year, total demand for gold (professional investors, individuals and central banks) rose by 8% compared to the first half of 2018 to reach 2,181.7 tonnes, the first since 2016.


Explosion of assets within global ETFs linked to gold and similar products - source: World Gold Council 
Finally, after the easing of monetary policies and the return to risk aversion, the last growth lever of the gold market is linked to the growing appetite of central banks, particularly those in emerging countries pursuing a policy of diversifying their foreign exchange reserves. Central banks bought 224.4 tonnes of gold in the second quarter of 2019. This brings purchases in the first half of the year to 374.1 tonnes, the largest net increase in gold reserves in half-yearly figures over 19 years.

In daily data, gold has extracted itself well from its congestion zone to regain height. Prices are thus progressing in line with the trend, which remains firmly upward, in line with the pentification of the various daily moving averages. Buyers thus retain control in the short term as long as the old resistance, which now serves as a support, is maintained. The next major obstacle is in the 1530-50 USD zone, a key level in weekly data from the beginning of the decade.

Our latest gold analyses:

Gold : Legitimate breathing phase
Gold : Transformed test
Gold : Planet alignment
Gold : Many bullish relays
Gold : Resilient despite risk appetite 

To learn more about the mechanisms underlying the evolution of gold prices:

Decryption : Lor wakes up
Decryption: Beware of water that sleeps
Jordan Dufee
Zonebourse.com 2019
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