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XAU/USD forecast for 20.07.2020

July 20, 2020

July 20, 2020

XAU/USD forecast: Four nuts for goldDmitri Demidenko

Fundamental gold price forecast for today

Gold can still break through its all-time highs

The huge monetary stimulus provided by the world’s leading central banks, and the weakness of the world’s major currencies have driven the gold price to the levels it was last seen in 2011. Will the growth of the inflation, or, maybe, stagflation, help gold to break through the all-time highs. When the XAU/USD bears are tired of fighting and are giving in, it doesn’t look like something unreal. According to Citigroup, the record high will be updated during 6-9 months. Besides, there is a 30% chance that the gold price will go up higher than $2000 per ounce in 3-5 months.

Ultra-low monetary policies of the central banks, the drop in the bonds real yields, a big flow of capitals into the gold ETFs, and the redistribution of assets in the investors’ portfolios allow the [XAU/USD][1] bulls to go ahead. Gold has already hot mew all-time highs against all G10 currencies except for the US dollar. It seems that the gold will soon break through the local high in trading versus the greenback. In addition to the high demand for ETF products, there is a rise in the demand for the inflation-protected bonds in July, as well as the drop in the USD index. All three factors are positive for gold.

The ETF gold holdings have increased by 450 tons, or $27 billion, since mid-July. It has become one of the major benefits of gold. The indicator has reached a record high of more than 3200 tons. During six months, investors bought the gold ETF products more than all central banks together in 2018-2019.

Dynamics of gold and ETF holdings

![LiteForex: XAU/USD forecast for 20.07.2020][2]

Source: Bloomberg

Earlier, bulls the [XAU/USD][1] bulls bet on the weakness of the world’s major currencies resulted from the huge monetary stimulus. Now, they are focused on inflation. Although the US PCE is far from the Fed’s target of 2%, 30-year Treasury inflation-protected securities are close to an all-time low, the yields on the 5-year and 10-year TIPS are close to the lowest levels since 2013 and 2012. In the week through July 8, investors invested about $5 billion in the related ETFs, having turned the trend of the capital outflow from the exchange-traded funds. The market expects the growth of the inflation rate, it is not confused by the current levels of the PCE and CPI. BofA Merrill Lynch says the US economy may face stagflation when the GDP is not recovering but the prices are growing.

In addition to the weakness of the world major currencies, including the US dollar, low Treasury real yields, and the expectations for the growth in consumer prices, another important growth driver for the [XAU/USD][1] is the redistribution of the investors’ assets. Stocks look too expensive according to the P/E ratio. Therefore, even strong US domestic data do not encourage the [S&P 500][3] bulls. Bonds, unlike the stock indexes trading in the green, are trading in the red area and also look overbought. Gold seems much more promising under the current conditions. So, one could think of increasing the share of gold in the investment portfolio. If the price breaks through the resistance zone of $1820-$1825, it makes sense to enter gold longs and take part in the LiteForex [contest ][4]devoted to the LiteForex 15th anniversary with excellent prizes.

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Price chart of XAUUSD in real time mode

![XAU/USD forecast: Four nuts for gold][7]

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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  2. cdn.liteforex.com/cache/uploads/blog_post/fundamental_analysis/etf-gold-20-07-20.jpg?w=30&s=c68e2897559cba26d0f0c4af0b32f966
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  7. cdn.liteforex.com/cache/uploads/blog_post/fundamental_analysis/liteforex-blog-gold-20-07-20.jpg?q=75&w=1000&s=c1c2ec4e54e81530f3967b42ad99df40