Gold is going through a “natural correction”… and 3 factors determine the course of the yellow metal
Gold ended its trading last week below the level of $4,000 per ounce, with the precious metal’s fever relatively subsiding over the past few periods under pressure The US dollar, which achieved a noticeable recovery last week, the decline of geopolitical tension, and the progress of trade talks between the United States and China.
A number of analysts expect gold to continue its decline in the short term as part of a natural correction movement, with the possibility of it reaching between $3,850 and $3,900 per ounce.
The analysts present 3 main scenarios that may limit the yellow metal’s upward momentum during the period. Coming.
Proving the independence of the Federal Reserve
The recent rallies broke out in Gold prices following US President Donald Trump’s attempt to fire Lisa Cook, a member of the Board of Governors of Central Bank. If she wins her case before the Supreme Court next year, one of the most important factors driving gold’s rise will disappear.
Wayne Gordon, an analyst at the Bank of India, says "UPS"The Federal Reserve has long been a reason… "killing" The rise of gold over previous periods. When there is something threatening the independence of monetary policy, markets become turbulent, and investors rush to safe havens, such as gold and metals, to protect their savings. It would confirm independence "Federal" To limit the upward trend of traditional safe assets.
Central banks stop hoarding gold
Some countries have increased their purchases of gold since the beginning of the year, causing prices to rise to historic levels. It is noteworthy that the former head of the Central Bank of the Philippines recommended last week that the bank begin selling some of its gold holdings due to them exceeding the target percentage. Any decrease in central bank purchases will remove one of the most important drivers of the rise of the precious metal.
The return of the US dollar to the rise
The relationship between gold and the US dollar is an inverse relationship, meaning that the lower the value of the dollar, the more attractive gold is (especially dollar-denominated gold) because in this case it becomes less expensive for holders of other currencies.
Saad Rahim, chief economist at the Group "Trafigura": "If America and China can avoid a trade war, the growth of the US economy accelerates, and concerns about government debt dissipate, this will reflect positively on the dollar, and negatively on gold."
He added: "However, it is necessary to pay attention to the lows and highs. The price of gold may reach $5,000, and it may reach $3,500, indicating that he does not rule out "Possibility of short-term price corrections."
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