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Fundamental that Supports The Rise In Gold, The Price of Gold Has Easily Risen Lately

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Fundamental that Supports The Rise In Gold, The Price of Gold Has Easily Risen Lately
Independent Analyst: Zhen QuanXi

On Tuesday (July 28), the precious metals market showed an increase in Asian markets. Gold prices hit record highs at $ 1980 / ounce. Gold is up nearly $ 40 a day, nearing the psychological mark of $ 2,000. The increase in gold prices was due to factors from the decline in the US Dollar which had driven demand for safe-haven assets and caused safe-haven assets to rise sharply.

Because high levels will not last long, historical highs have only been held for less than 30 seconds and there has been a large amount of profit taking to push prices down quickly. The investor collects a large amount of profit and closes the position. Finally, a 100% increase in the Asian market fell back to its original number. At the same time, COMEX - the most active gold futures contract with a trading volume of 6,768 lots in three minutes from 11: 03-11: 05 Beijing time, with a total value of more than 1.3 billion US Dollars.

The downturn in the market is still not over. At the opening of the European market, gold also began to sell badly. The decline was similar to Asian markets with a decline approaching 40 US Dollars, dropping back to Monday's figure before the sharp spike. fell back to the starting point where gold began to skyrocket on Monday.

Will the fundamental factors that support the increase in gold prices disappear in an instant?

First of all, the weakness of the US dollar is one of the important factors causing gold prices to rise sharply. There are many reasons for the weakening US dollar: Sino-US disputes are worsening, fears that the US is struggling to contain the epidemic, uncertainty about the US presidential election in November, and rising hopes that the Fed will have to further cut policy rates. Analysts predict that to achieve the goal of maximizing employment, the Fed will increase corporate protection by buying more debt, which will make the dollar's prospects weaker.

Secondly, deteriorating relations between China and the US are also one of the important factors causing the gold wave to rise sharply. Before China and the United States resolve the dispute, I believe that the price of gold will not fall sharply.

However, geopolitical risk remains serious. Right after "Five Eyes" countries such as Canada, Australia, Britain and New Zealand announced the suspension of extradition agreements with Hong Kong, Chinese Foreign Ministry spokesman Wang Wenbin announced at a regular press conference on July 28, Beijing time, "China decided Hong Kong Special Administrative Region Suspends Hong Kong-Canada, Hong Kong-Macau, Hong Kong-UK fugitive agreements At the same time, it was decided that the Hong Kong Special Administrative Region will suspend the criminal justice assistance agreement with Hong Kong, Canada, Hong Kong- Macau, Hong Kong-UK, geopolitical risks remain serious.Finally, economic and political uncertainty caused by the corona virus pandemic, and the central bank's response measures to cut interest rates and inject large amounts of cash into the market. Increasingly intensive concerns about inflation, and gold that does not produce is considered a tool for hedging against inflation and currency devaluation.

At present, the United States will announce a new round of new crown epidemic relief plans, which have a scale of one trillion US dollars, a new stimulus plan, and the market expects that the Fed will continue loose monetary policy at this week's interest rate meeting. Seeing an increase, under various effects, the dollar index continues to weaken, so there is no doubt that gold has risen.

Investor Tactics:
The decline in gold prices after reaching record highs in history is only supported by strong support from the Fibonacci 38.2% pullback. As long as the market outlook does not fall below this point, 1906 is a bullish buying trend; The bullish trend above 1906 is still well established. If 1933 penetrates the 23.6% position, this is also an opportunity to look for a callback to buy long.

Expected Goals:
In the short term, look at the first target near {1968}, the second target near {1985}, and the third target near {1993}.

This article also covered in the Guo Ji Ri Bao newspaper issued on July 30, 2020.