Logo

Posts

Gold price forecast September 28 2020

2020-09-28

2020-09-28

Gold could break the bottom. Forecast as of 28.09.2020Dmitri Demidenko

It seems that the gold price has reached its bottom; however, it may continue declining. Will the gold fall deeper? We shall discuss the gold outlook and make a [XAUUSD][1] trading plan.

Weekly fundamental gold price forecast

Investors again buy the US dollar; the inflation expectations go down, the ETF traders stay passive, investors are disappointed with the gold performance in the risk hedging area. These reasons sent the [XAUUSD][1] to its two-month low. The winner has turned into a loser. It is a common situation in the financial markets. As I expected in [early September][2], the gold price dropped to $1865 per ounce. However, should we enter longs right now?

If you consider buying gold now, you should take into account four factors: the US dollar, the Treasury real yield, the ETF holdings, and the global risk appetite. The precious metal is considered to be a safe- haven asset, so the rise in the FX volatility used to support the [XAUUSD][1] growth in the past. The situation is different in 2020. According to JP Morgan, purchases of gold and yen against the greenback, as well as buying the franc against the euro, amid a drop in the global risk appetite, are now yielding the least return over the past decade. It is better to buy the yen versus a basket of currencies and (or) enter the US longs versus emerging markets’ currencies.

In my opinion, the US dollar outperforms gold as a safe haven, also because of the sharp cut in the federal funds rate that has driven the investment world into the era of the ultra-low bond yields. The stability of real yields in the US bond market has discouraged the [XAUUSD][1] bulls. The real yields will continue falling if the inflation expectations increase. The inflation expectations, however, are down to the lowest level since early August.

Dynamics of gold and real yields on Treasuries

Source : Bloomberg

According to Commerzbank, a sharper drop in the gold price in late September than previously expected results from the Forex trends. In late spring and early summer, the market was enthusiastic about US dollar selloffs. However, the second COVID-19 wave in Europe, the ECB verbal interventions, and the [S&P 500][3] correction encouraged investors to exit the USD shorts. So, the USD has been up to the two- month high.

Dynamics of gold and the US dollar

Source : Bloomberg

Initially, buying gold in the zone of $1850-$1865 looked wise amid the most significant daily capital inflow into gold ETFs on September 21. However, the indicator resented mixed dynamics later. According to Amro Bank, traders took a break. However, if the [XAUUSD][1] continues falling, the gold ETF should reduce their holdings.

Dynamics of capital inflows in gold ETFs

Source : Bloomberg

Weekly gold trading plan

I believe the [XAUUSD][1] bulls will be held back until the US dollar shows weakness, and the inflation expectations start rising. Uncertainty around the upcoming US presidential election supports the dollar; it could continue after the elections. Therefore, the gold price could drop to $1815-$1820or even to $1770. In the meanwhile, we shall wait and see. It will be relevant to consider entering gold longs when the price goes back above $1875.

P.S. Did you like my article? Share it in social networks: it will be the best “thank you” :)

Ask me questions and comment below. I’ll be glad to answer your questions and give necessary explanations.

Useful links:

  • I recommend trying to trade with a reliable broker [here][4]. The system allows you to trade by yourself or copy successful traders from all across the globe.
  • Use my promo-code BLOG for getting deposit bonus 50% on LiteForex platform. Just enter this code in the appropriate field while [depositing][5] your trading account.
  • Telegram chat for traders: . We are sharing the signals and trading experience
  • Telegram channel with high-quality analytics, Forex reviews, training articles, and other useful things for traders

Price chart of XAUUSD in real time mode

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.

Rate this article:

{{value}}

( {{count}} {{title}} )

  1. my.liteforex.com/trading/chart?symbol=XAUUSD&returnUrl=true
  2. www.liteforex.com/blog/analysts-opinions/xauusd-forecast-gold-goes-down-in-the-second-wave/
  3. my.liteforex.com/trading/chart?symbol=SPX&returnUrl=true
  4. my.liteforex.com/?category=analysts-opinions&slug=gold-could-break-the-bottom-forecast-as-of-28092020&openPopup=%2Fregistration%2Fpopup&utm_source=blog&utm_medium=article&utm_campaign=bonus
  5. my.liteforex.com/deposit/?category=analysts-opinions&slug=gold-could-break-the-bottom-forecast-as-of-28092020&promo_code=BLOG&utm_source=blog&utm_medium=article&utm_campaign=bonus