After breaking above the $ 2,000 threshold, the gold price continues to rise and touches a new high at $ 2,037, supported by the drop in bond yields and the weakness of the dollar. Medium-long term gold price forecasts remain bullish.
Ten days ago I wrote that “gold forecasts are bullish, super highs are coming“, and indeed gold crossed the $ 2,000 mark for the first time in history on Tuesday, August 4, then on the morning of Wednesday August 5, the XAU/USD continued to rise, hitting a new high at $ 2,040. Gold price forecasts are bullish, strongly bullish, and the rally will likely continue with new highs in the coming days.
There are those who say that central banks have bought gold, others that purchases have been made to protect long positions on the stock market, still others speculate big stop losses above all technical levels, which are self-sustaining because many they try to sell but are forced to stop. The truth is a mix of these factors, but in fact the most important is perhaps the weakness of the dollar, which seemed ready, even observing the Dollar index, to a significant and interesting bullish correction, instead it gave up a lot against the euro and the pound, but also against the Australian and Canadian dollar ( >>> Dollar forecast: the downtrend continues, corrections and test in the coming weeks).
Why does the price of gold continue to rise?
The very low interest rates of government bonds (US treasury bonds but also of the main European countries) and the hopes of further stimuli to safeguard US and European economies, hard hit by the Covid crisis, push the gold price to a continuous rise: since the central banks they injected liquidity on the markets, the bullish trend of gold has strengthened a lot. The yellow metal also received a boost due to its safe haven status and this was evident during the COVID-19 pandemic. It is not only central banks that support markets, as governments have also conducted fiscal stimulus programs.
The two main key factors for the rise in gold are the persistent weakness of the US dollar and yields on US Treasuries are at record lows. The decline in bond yields remains a reflection of the worsening US economic situation, due to the pandemic’s continuing and the US Congress stalemate on the health emergency assistance package.
Gold price forecasts: new highs coming soon
Low bond yields and dollar weakness will continue to support gold demand. According to analysts, the historical highs could be repeated if the bulls regain control along the path of the psychological level of $ 2,050.
So the prospects for gold remain very strong for gold. Interestingly, we saw traders reduce their gold exposures during this latest rally, suggesting to new buyers that they could still return to the market to push prices higher. Despite the potential short-term reversal, medium-long term forecasts for gold and other precious metals remain bullish.
The resistance level of $ 2,000 was a strong threshold for the gold price and significant volumes were placed there. Any news related to the new monetary stimulus from the American Federal Reserve, but also from the ECB, could trigger further growth in gold.