GOLD AND USDX : Daily Signal And Analysis From InstaForex

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mazri_2008

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According to Wolfgang Seybold, director of AXINO Investment GmbH and an expert in the precious metals market, the price of gold traded in major world currencies has now reached a record peak.

Many central banks are actively buying precious metals for their reserves in order to reduce their dependence on the US currency.

According to Seybold, it is not the yellow metal that has increased in price, but the traditional currencies have depreciated in relation to it.

The expert is certain that with such depreciation, gold should cost much more, about $5000 per ounce. However, this is impossible, because it is contrary to the modern banking system.
 
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The rapid rise in gold prices is hindered by a number of factors, including overbought precious metal quotes and a fall in the shares of gold mining companies.

At the same time, experts record a noticeable imbalance between the lack of growth in securities of gold mining companies and the active rise in the price of gold over the past four years. Note that since 2016, the gold quotes twice updated the current highs.

In the second half of February, the precious metals market begins to become seasonally cheaper, that is, from next week, a massive decline in gold is not ruled out.

Experts predict a drop in yellow metal to $1,540 per ounce, although they do not exclude the possibility of a rise. If the bar reaches $1620, gold will open the way to $1,700 per ounce or higher, analysts said.
 

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Gold Holds Above $1600 On Growth Worries

Oil prices edged higher on Wednesday to trade above $1,600 as investors continued to fret about the cascading economic impact of the new coronavirus outbreak in China, which has claimed more than 2000 lives and spread panic worldwide. Both spot gold and U.S. gold futures were up 0.6 percent at $1,613.15 per ounce and $1,613.25, respectively.

Equities edged higher today after data showed the rate of increase in the number of confirmed cases of infection slowed in China. According to the National Health Commission, mainland China had 1,749 new confirmed cases of coronavirus infections on Tuesday, down from 1,886 cases a day earlier and the lowest since Jan. 29.

Markets also remain hopeful that China will cut its benchmark loan prime rate Thursday to offset the economic damage caused by the coronavirus outbreak. Focus shifts to the publication of the FOMC minutes later today, which may provide additional details on how FOMC participants viewed the outbreak of COVID-19 in late January.
 

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Gold Futures Settle Notably Higher Again

Gold prices climbed higher on Wednesday, extending gains to a fifth successive session, despite riskier assets such as equities gaining ground. Although reports say the number of new coronavirus cases fell for a second straight day on Tuesday, concerns about the economic impact of the virus outbreak continued to prompt investors to seek the safe-haven asset. Stronger than expected U.S. housing data limited gold's gains.

The dollar index rose to 99.71 and was last seen at 99.69, up 0.25% from previous close. Gold futures for April ended up $8.20, or about 0.5%, at $1,611.80 an ounce, a fresh high since end March 2013. Silver futures for March ended up $0.167 at $18.311 an ounce, while Copper futures for March settled at $2.6060 per pound, gaining $0.0020 for the session. A report from the International Monetary Fund said the global economy is set for a fragile and shallow recovery and the coronavirus outbreak in China is posing a new threat to the outlook.

"Global growth appears to be bottoming out, but the projected recovery is fragile," the lender said in a surveillance note for the G20 finance ministers and central bank governors meeting to be held in the Saudi Arabian capital of Riyadh on February 22-23. "The projected recovery is expected to be shallow and subject to downside risks," the note said. The IMF Managing Director Kristalina Georgieva said in a blog, "The global economy is far from solid ground...

The truth is that uncertainty is becoming the new normal." A report released by the Commerce Department on Wednesday showed housing starts slumped by 3.6% to an annual rate of 1.567 million in January after soaring by 17.7% to a revised rate of 1.626 million in December.

Economists had expected housing starts to tumble by 11.4% to a rate of 1.425 million from the 1.608 million originally reported for the previous month. Meanwhile, the report said building permits spiked by 9.2% to an annual rate of 1.551 million in January after sliding by 3.7% to a revised rate of 1.420 million in December. Data from the Labor Department showed that its producer price index for final demand climbed by 0.5% in January after rising by 0.2% in December. Economists had expected producer prices to inch up by 0.1%.
 

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Gold and the coronavirus



While US stocks continue to show record growth, the gold market, despite its historical highs, has been weakening recently. The shiny metal increased by 4% this year, while SPDR Gold (GLD A-) shares increased by 3%.

Although at the beginning of last month, the prices of gold reached their highest level since April 2013, it became more subdued when February started. Since the end of January, gold has been trading in a sideways trend, as investors accumulate in stocks.

Problems with the precious metal continue in the Chinese gold market, where demand for jewelry is expected to decline, due to the growing concerns about the coronavirus. The demand for jewelry is expected to decline in the global gold consumption market. "People are not in the mood to buy jewelry.

Stores and shopping centers are closed due to the virus. Sales of gold jewelry and bullion will fall significantly this year, " Zhang Yongtao, executive director of China Gold Association, said in a recent interview with Bloomberg.
 

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Usually, the value of gold moves back to the dollar, since the value of the precious metal in the international market is indicated in US currency. "Gold prices have already increased as much as possible," Georgette Boelle, senior analyst for foreign exchange and precious metals at the Dutch Bank, said in a report published last Friday

. "We still expect a price correction in the coming weeks and months." Considering the fact that, in general, bullish gold positions are becoming more crowded, it may be better for investors to wait for a correction.
 

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Besides the current technical data, what can end gold's growth?

To begin with, the coronavirus outbreak is increasing and receding. China is taking quick steps to normalize its economy, to show the world that it is back in business. In addition, rising inflation may also reduce consumer interest in gold, although this is unlikely to happen because of the modest growth for several years.

In order to understand the movement of the precious metal, gold traders should closely monitor the bond market, as well as the credit market.

New statistics on those infected in China have been published today. It recorded the lowest number of cases since January 23, indicating 394 newly infected, compared to 1,693 on Wednesday:

 

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Besides the current technical data, what can end gold's growth?

To begin with, the coronavirus outbreak is increasing and receding. China is taking quick steps to normalize its economy, to show the world that it is back in business. In addition, rising inflation may also reduce consumer interest in gold, although this is unlikely to happen because of the modest growth for several years.

In order to understand the movement of the precious metal, gold traders should closely monitor the bond market, as well as the credit market.

New statistics on those infected in China have been published today. It recorded the lowest number of cases since January 23, indicating 394 newly infected, compared to 1,693 on Wednesday:

coronavirus has effected economy growth mostly for tourism and trading sector. 😨😰 to all trading peers take care of your health too 😬
 
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