Both Gold and Silver rose sharply overnight, with gold up 0.80% as we head into the London open, on track to posting its best month in 8 and half years. The dollar slid overnight amid concerning US GDP data for Q2 which showed a contraction of 32.9%, a historic record, triggering fresh concerns over economic recovery prospects and more importantly, how long this recovery will actually take.
President Trump also tweeted that he wanted to delay the US elections taking place this year on November the 3rd, suggesting uncertainty over his future presidential seat prospects, it will later be confirmed that Trump has no power to make this change and election dates will remain unchanged, however, the uncertainty from the initial tweet has contributed towards further dollar weakness thus boosting gold higher.
Additionally, the dollar index has slid to a 2-year low, it is now actually cheaper to hold other currencies, as a result, flows may continue to move away from the dollar and diverge into other more stable currency, adding another bearish confluence.
What’s next for Gold?
Gold is in a strong position to reach $2,000 per ounce, supported by the geopolitical risks and rising COVID-19 risks, the main risk in terms of pricing will be a potentially overvalued asset and developments from vaccines which are due to emerge over the course of the next 2 weeks.
Currently, prices are trading within a pendant like structure, with a technical breakout suggesting a move to the upside, to the $2,000 mark. Note that this is a very big physiological level, volatility will be high and whiplash should be expected. Alternatively, if prices fail to break above the upper trendline resistance of the pendant structure, we could see price fall towards the 1965-1948 range once again.