XAUUSD Gold Forecast: Trade Deal, UK Elections and FOMC are closed

XAUUSD Gold Forecast: Trade Deal, UK Elections and FOMC are closed

Fundamentals:

1. The U.S. and China struck a partial trade deal. You can read the fact sheet here.
2. PM Johnson wins the elections means Britain is set to leave the EU on Jan. 31.
3. The FED kept the rates unchanged as predicted.

Issues – Concerns – Questions :

Easing monetary policies of all Major Central Banks are supportive for Gold Prices medium term. – Gold Positive –

Dot Plot of FOMC shows no change is expected in 2020. However, the main issue is not the interest rates. It is the Fed’s Repo operations. Nearly three months on, the question of what happened in US dollar repo markets in September — when interbank repo rates spiked to uncharacteristically high levels sparking emergency funding moves from the Fed — is no closer to being properly answered. Some analysts predict that further stress at the end of the year will prompt the Federal Reserve to restart full-scale quantitative easing, rather than just buying short-dated Treasury bills, as it is now. An interview with Zoltan Pozsar of Credit Suisse has been published on Financial Times. He has a striking detection: ” the Fed’s next step will be to unleash the full capabilities of QE and buy US government bonds of all maturities. This would, in effect, reverse the central bank’s attempts to shrink its balance sheet, which drained cash out of financial markets from late 2017.“People have been blaming banks for not lending or blaming hedge funds,” “My bigger picture point is that we tapered the balance sheet too much, too fast. The Fed needs to undo that.”

This was a predictable outcome. A few months ago I wrote an article about this subject. I have written that ” the Fed’s Repo operations might be considered as a new easing cycle and markets can price it USD negative near term”

Brexit & Trade Deals:

Bloomberg: “Two of the biggest hurdles constraining the world economy have just been cleared.” Trade Deal and UK Elections.

One of the reasons for stronger Gold was Brexit uncertainty. Political and macroeconomic uncertainties support Gold prices.

However, according to Bloomberg, at the same time, Johnson must now negotiate a new trade deal with the EU by the end of next year, meaning fresh uncertainty could emerge. “Brexit could continue to weigh on economic activity as the difficult task of forging the U.K.’s new trading relationships is just beginning,” said Simon Wells, chief European economist at HSBC Holdings Plc.

And concerns about the trade deal can be summarized: “The phase one deal nevertheless leaves some complicated issues unresolved, paving the way for fresh clashes as Trump runs for reelection next November. Still to be dealt with are U.S. complaints over the vast web of subsidies ranging from cheap electricity to low-cost loans that China has used to build its industrial might. Trump said talks over a Phase Two deal will start immediately.”

Another issue is the year-end operations of the Hedge Funds. As I have mentioned in my Gold report published in August, some ETFs – like JP – have big physical Gold and Silver positions. Some of those positions are sold with profit-taking purposes. Will they rebuy before the year ends?

Summary: I predict bullish continuation in Gold prices medium term as long as the prices holds above 1380 $.

Technically:

First, I post the link of my latest gold report here : XAUUSD Gold Report: US-China Trade War and Risk Appetite

Long term forecast and weekly chart’s analysis are unchanged.

• As long as it stays above USD 1,376 in the long term, we consider the pullbacks as an opportunity to buy. Daily closing above 1508 would be the confirmation of Bullish trend continuation to add long positions. Targets are 1586 1600 & 1652.

• If XAUUSD makes daily closing below 1.445 $, it is likely to test 1437 1421 and 1406.

The outlook on the Daily Chart is the same:

XAUUSD is printing a falling wedge. Breakout of the wedge will trigger the bullish move. However, it is too early to speak about this breakout. 1440 is our key support. A downward breakout will send the prices 1420$ and 1400 $. The downside seems limited and capped by SMA200 Daily in 1406.

1403 is confirmed by Fibonacci 38.2 retracement as shown in our famous weekly chart.

In the smaller charts, we can see that Gold prices were stuck in a 30$ range. 1450 $ – 1480 $.

H4 closing above 1484 $ could ease the short term pressure on Gold and send the price 1500$-1506$.

If it fails to break and close above 1484$, it is likely to pull back to 1445 $ before the year-end.

As seen on the H1 chart, we have a few patterns to trade with shorter-term purposes. We will send you an entry notification as soon as we get confirmation.

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