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Make Money in Forex by Avoiding These Psychological Risks May 24, 2022
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US Stimulus Package an Indicator for Gold’s Growth

Instaforex by Instaforex
October 6, 2020
in Market News
Reading Time: 2 mins read

If earlier missiles fired at the Middle East, or nuclear tests conducted by North Korea, could easily trigger a gold rally, now all this seems to have no meaning for the so-called “safe harbor”.

Even the news that US President Donald Trump had contracted the coronavirus did not cause the precious metal to rise rapidly. Nonetheless, against this news background, gold rose above $1900, however, this movement did not receive a strong continuation.

The dollar, on the other hand, reacted quite positively and began to strengthen. The weakening of Trump’s positions in the election race is a positive factor for the greenback, as it increases the alertness of stock market participants and increases the craving for defensive assets.

Greenback has risen periodically since early August, despite a gaping U.S. budget deficit pit, record unemployment rates in the country, and other economic troubles associated with the COVID-19 pandemic.

It is the counterintuitive rise in the USD that is one of the reasons why gold is unable to return to record highs in the $ 2,000 mark.

At the same time, it is now becoming clear that new economic stimulus measures in the US are needed to resume the gold’s upward trend. Without this, according to experts, sentiment on the precious metal market is increasingly shifting towards bearish.

This year, gold has reached unprecedented heights amid unprecedented support measures for the US economy.

The $3 trillion allocated for this purpose dried up by the second quarter, additional funds were needed to inject into the economy, and the gold bulls were already anticipating the ringing of coins.

However, negotiations between Republicans and Democrats on the next package of support measures have stalled.

Against this background, gold dipped in September to two-month lows around $1,855.

After much verbal battles in Congress, progress was at last made last week, when US Treasury Secretary Steven Mnuchin announced that he had had a round of effective talks with House Speaker Nancy Pelosi on new measures to stimulate the national economy.

This allowed gold to move away from two-month lows and return to $ 1900.

The hopes that the US Congress will pass stimulus legislation seems to be what the market is holding onto right now.

“We expect gold to continue to consolidate ahead of a possible move above $ 1993 to target $ 2075 again. A possible move above this level will resume the bullish trend with resistance at $ 2,175, then at $ 2,300. Meanwhile, a breakdown of the $ 1,837 mark could trigger a deeper fall to $ 1,765, potentially to $ 1,726. We are not looking for weak points here, which will appear below. However, if this happened, it would significantly increase the risk of the end of the bullish trend,” said Credit Suisse.


Source : US stimulus package an indicator for gold’s growth

Tags: GOLDInstaForexUSD
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