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XAUUSD forecast for 29.06.2020

June 29, 2020

June 29, 2020

Gold uptrend continuesDmitri Demidenko

Gold price fundamental forecast today

The U.S. dollar supports the gold uptrend

It is really amazing how the Western media are insisting that the major reason for the gold price surge is the growth of COVID-19 cases in the U.S. to a record high. I wonder what they will write when the number of new coronavirus cases starts declining, or the creation of the coronavirus vaccine will send the US stock indexes up and the US dollar down. In a positive scenario, the gold price can well be up above $1800 per ounce. The media are likely to find another reason for the [XAU/USD][1] rally. In Forex, just like in life, ignorance of the law is no excuse. If you do not know the market laws, you will lose in trading.

The chain “coronavirus- safe-haven demand-gold” could seem reasonable. However, the most reliable safe-haven asset now is thought to be the U.S. dollar. So, the gold future price trend depends now on the US dollar status. In theory, a safe-haven asset is a financial instrument that is expected to retain or even gain its value during periods of economic downturn. This definition perfectly describes the greenback and the Treasuries, the gold price reacts to their trends.

Historically, the strongest negative correlation is between gold and Treasury real yields. Besides, the risk of another lockdown in the USA and the W-shaped recovery of the US GDP, like it was in the 1930s, may press the US bond market rates even lower. Especially since, in this case, the Fed will have to increase the size of the monetary stimulus.

Dynamics of gold and Treasury real yields

![LiteForex: XAUUSD forecast for 29.06.2020][2]

Source: Bloomberg

Besides, the Fed’s monetary easing is a bullish factor for the US stock indexes and the bearish factor for the U.S. dollar. This is evident from the [XAU/USD][1] drop to 1745, following the crash of the S&P 500 at the beginning of the trade session on June 26 amid the deterioration of the epidemiological situation. The stock market is declining, which signals the growth of the safe-haven demand that is a potential rise of the dollar. But the greenback isn’t rising, while the pessimistic projections for the GDP under the current conditions suggest a soon expansion of the fiscal and monetary stimulus in the USA. The COVID-19 situation in Europe and China is better than in the U.S. Therefore, the euro-area economy is likely to rebound sooner than the U.S. GDP, which supports the EUR/USD. As a result, gold very quickly gains back the positions lost at the beginning of the US Forex session, making one more step towards $1800 per ounce.

There is obviously some correlation between the coronavirus news and the gold trend, they are like two sides of the same coin. However, the [XAU/USD][1] is rallying up not because the epidemiological situation is deteriorating. The gold uptrend could be broken only if the U.S. economic recovery is W-shaped. In all the other cases, low Treasury yields, the Fed’s huge monetary stimulus, which is associated with the dollar weakness, will allow gold to meet my [forecast][3] for $1830 per ounce. It is still relevant to buy gold on the price falls.

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Price chart of XAUUSD in real time mode

![Gold uptrend continues][6]

The content of this article reflects the author’s opinion and does not necessarily reflect the official position of LiteForex. The material published on this page is provided for informational purposes only and should not be considered as the provision of investment advice for the purposes of Directive 2004/39/EC.

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  1. my.liteforex.com/trading/chart?symbol=XAUUSD&returnUrl=true
  2. cdn.liteforex.com/cache/uploads/blog_post/fundamental_analysis/bonds-gold-29-06-20.jpg?w=30&s=e254454b3b01f2a6a9336a4d6350eb0c
  3. www.liteforex.com/blog/analysts-opinions/gold-the-pandemic-starts-and-ends-but-the-liquidity-remains/
  4. my.liteforex.com/?category=analysts-opinions&slug=gold-uptrend-continues&openPopup=%2Fregistration%2Fpopup&utm_source=blog&utm_medium=article&utm_campaign=bonus
  5. my.liteforex.com/deposit/?category=analysts-opinions&slug=gold-uptrend-continues&promo_code=BLOG&utm_source=blog&utm_medium=article&utm_campaign=bonus
  6. cdn.liteforex.com/cache/uploads/blog_post/fundamental_analysis/liteforex-blog-gold-29-06-20.jpg?q=75&w=1000&s=fa87fab0f236f516d64865fbefdf0f96