$XAU, $GLD, $USD
FLASH: There has been a dramatic change in the sentiment of Gold Bugs
Bold prices have risen this month, passing $1,400 oz for the 1st time since Y 2013.
There have been good reasons to be Bullish the precious Yellow metal. Everything from Dovish central banks, technical indicators, negative-yielding bonds are all working in favor of higher prices.
Below are some Key reasons to turn even more Bullish gold as follows:
- The Fed opened the way to reducing interest rates this week, leading to a dive in USD. Central banks in Europe and Australia shifted the tone to easy policy ahead.
- More bond yields are turning negative, meaning there is greater appeal in gold over other safe haven assets.
- Geopolitical tensions hotted up. President Trump called off military strikes against Iran Thursday night.
- Huge sidelined money is coming back into the market. ETFs (exchange-traded funds) backed by gold have seen inflows jump since late May.
- Central banks including Russia and China have been and continue buying gold.
The enthusiasm is justified, with $1,500 – 1,600 possible in the next 12 months under a Bullish-case scenario that includes borrowing costs falling below Zero. Strategists at Australia and New Zealand Banking Group Ltd. joined in Friday, saying gold will remain a “highly relevant” portfolio diversifier.
In the longer term, a Key risk to the market is if the Fed does not follow through with US interest rate cuts.
UBS predicts 3 rate cuts this year, but the market is pricing in 3
Gold for August delivery climbed 4.1% on the week, posting the biggest gainer for a most-active contract since April 2016. The precious Yellow metal’s ascent to $1,400 faced resistance after US existing home sales topped estimates and as tensions with Iran dialed down.. But, by the end of trading Friday, bullion settled at $1,400.10 oz in New York.
Note: When the market goes up as fast as gold did over the last 3 weeks, you can expect pullbacks, but the trend will still remain up.
Have a terrific weekend.