Gold Tracking Toward Its Highest Close in 7 Years Can We Break 1700

Gold Tracking Toward Its Highest Close in 7+ Years – Can We Break $1700?

Amidst the profound disruptions wrought by the global COVID-19 pandemic, it’s reassuring to see an example of a market reaction that “makes sense.”

That brings us to this morning’s Federal Reserve announcement of an unprecedented new program to provide $2.3 trillion in new loans, including purchases of investment-grade and high-yield bonds in the secondary market. In the words of Fed Chairman Jerome Powell, “The Fed’s role is to provide as much relief and stability as we can during this period of constrained economic activity, and our actions today will help ensure that the eventual recovery is as vigorous as possible.” Whether or not you agree with the latest expansion of the Fed’s stimulus measures, it’s clear that the program injects a massive new dose of liquidity into the economy, and under those circumstances, you would expect so-called “hard assets” like gold to rally, all else equal.

Thankfully for our collective sanity as market participants, that’s exactly what we’re seeing: the yellow metal is poised to close at its highest level in more than 7 years just below the $1700 level. Traders are coming to the realization that US and global policymakers will do whatever it takes to promote economic growth, raising the probability of future inflationary pressures, the exact environment that has historically benefited gold:

Source: TradingView, GAIN Capital

Technically speaking, a close above $1700 would confirm a bullish breakout and clear the way for a potential continuation toward the 2011/2012 highs in the $1800 area, followed by the all-time record higher near 1900. This short-term bullish bias may be called into question on a break below yesterday’s low near $1640, but as long as that short-term low holds, bulls will maintain the upper hand.

StoneX Financial Ltd (trading as “City Index”) is an execution-only service provider. This material, whether or not it states any opinions, is for general information purposes only and it does not take into account your personal circumstances or objectives. This material has been prepared using the thoughts and opinions of the author and these may change. However, City Index does not plan to provide further updates to any material once published and it is not under any obligation to keep this material up to date. This material is short term in nature and may only relate to facts and circumstances existing at a specific time or day. Nothing in this material is (or should be considered to be) financial, investment, legal, tax or other advice and no reliance should be placed on it.

No opinion given in this material constitutes a recommendation by City Index or the author that any particular investment, security, transaction or investment strategy is suitable for any specific person. The material has not been prepared in accordance with legal requirements designed to promote the independence of investment research. Although City Index is not specifically prevented from dealing before providing this material, City Index does not seek to take advantage of the material prior to its dissemination. This material is not intended for distribution to, or use by, any person in any country or jurisdiction where such distribution or use would be contrary to local law or regulation.

For further details see our full non-independent research disclaimer and quarterly summary.

CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 69% 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. CFD and Forex Trading are leveraged products and your capital is at risk. They may not be suitable for everyone. Please ensure you fully understand the risks involved by reading our full risk warning.

City Index is a trading name of StoneX Financial Ltd. Head and Registered Office: 1st Floor, Moor House, 120 London Wall, London, EC2Y 5ET. StoneX Financial Ltd is a company registered in England and Wales, number: 05616586. Authorised and regulated by the Financial Conduct Authority. FCA Register Number: 446717.

City Index is a trademark of StoneX Financial Ltd.

The information on this website is not targeted at the general public of any particular country. It is not intended for distribution to residents in any country where such distribution or use would contravene any local law or regulatory requirement.