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Forecast for XAUUSD for 12 August 2020

August 12, 2020

August 12, 2020

Forecast for XAU/USD: precious metals fell into disgraceDmitri Demidenko

Fundamental forecast for gold for today

Gold may drift apart from the sector’s other assets

The market can punish for excessive self-confidence. As long as the dollar was weak and the US bond yield wandered near its historic highs, gold didn’t complain about the lack of bullish forecasts. Alas! Precious metals fell into disgrace once the bond market rates grew on the Treasury’s increased debt issuance, better macro statistics, lower number on new COVID cases in the US, and Russia’s intention to start using the first vaccine.

Gold registered the worst one-day evolution in 7 years, pulling down silver, platinum, and palladium too.

[As I supposed][1], the signal of [XAU/USD][2]’s correction was good US data on the labor market. The investors were truly surprised when the employment rate grew amidst the worsening epidemiological situation and slow lockdown lifting. They are sure that the Democrats and the Republicans have agreed about fiscal stimulus despite all related hardships. Add the record low number of new cases in the past four weeks and positive news about the vaccine, and the bears’ euphoria about treasuries becomes more understandable. The rates went up, gold collapsed.

Gold and bold yields evolution

![LiteForex: Forecast for XAUUSD for 12 August 2020][3]

Source: Bloomberg.

What’s next? This situation is painfully similar to 2011. The investors were disappointed that inflation hadn’t grown on the Fed’s enormous liquidity volume, and gold tumbled.

Today, no one knows where consumer prices will go. Inflation is usually related to a strong economy, while investors doubt that the US GDP should return to the trend fast. Citigroup believes that gold may have risen to $2,400 by the end of 2020, and BofA Merrill Lynch forecasts growth to $3,000 within 18 months, thinking that financial repressions and a weak dollar are still there. So, the bulls in gold must be confident. But I think it’s time to re-estimate this asset’s potential.

The precious metal became part and parcel of investment portfolios. Its share didn’t often go below 1% or above 1.2% in the past five years. On average, its share was 1.09%. As the stock market’s cap is growing, it’s 42 thousand tons or $200 trillion. Gold found its place and is likely to consolidate at $1,700-2,100 per ounce in the medium or long term.

Investors should probably consider other metals whose share in industrial use is higher than gold’s one. For example, the car industry’s fast growth makes platinoids interesting. The Fed has bought out $224 billion bonds issued by car manufacturers. It’s more than in any other economic sector. The EU intends to spend $61 billion on projects tied to climate-friendly measures.

Since [platinum’s][4] and [palladium’s][5] shares in the production of autocatalysts are high, I recommend buying them with targets at $1,050 and $2,280 per ounce.

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Price chart of XAUUSD in real time mode

![Forecast for XAU/USD: precious metals fell into disgrace][8]

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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