Gold price forecast 10 Novemebr 2020

2020-11-10

Gold pays the debts back. 10.11.2020Dmitri Demidenko

Many bullish factors are already price in the XAUUSD. The hope for the global economic recovery as vaccines are being developed encourages speculators to exit gold longs. Let us discuss gold prospects and make up a [XAUUSD][1] trading plan.

Monthly gold fundamental forecast

Gold is rolling down, and my forecast comes true. [Just a few days ago][2], I recommended selling gold on the rebound from the resistance at $1965. Gold has been more than 5% down, and one could have made quite a lot of money on this strategy. Most of the positive factors have already been priced in the [XAUUSD][1]. The good news about COVID-19 vaccines has crashed the gold prices.

Gold trades could face the same situation as it was in 2011. 9 years ago, the global economy was recovering after the recession; massive fiscal and monetary stimuli weakened the world’s major currencies and fueled up inflation expectations, which was a bullish factor for the [XAUUSD][1]. However, consumer prices grew very slowly, and the gold uptrend broke down. In 2020, the hopes for the expansion of financial aid to at least $2 trillion encouraged the gold bulls to go ahead. Nonetheless, the divided congress and the information about vaccines set the gold buyers back.

The gold uptrend seemed to base on a strong foundation. The monetary stimuli now are the biggest ever, which boosts the central banks’ balance sheets, weakening the global currencies and increasing the volume of negative-yielding bonds up to a record high of $17.05 trillion.

Dynamics of central banks’ balance sheets

Source : Wall Street Journal

Dynamics of volumes of bonds with negative yields

Source : Bloomberg

Nonetheless, the situation cannot be stable by its nature, and it is going to change.

First, grate money supplies provided by central banks turned out into a liquidity trap. Additional monetary stimuli won’t be as effective as they used to be. It is evident from the reaction of the Australian dollar and the British pound to the monetary easing performed by the RBA and the BoE. These currencies strengthened, though they should have weakened under normal conditions. Regulators are more likely to change the structure of the QE rather than the volumes. The balance sheets should not increase as fast as before.

Second, Joe Biden’s victory along with the divided Congress lowers the chances of a massive fiscal stimulus. The gold bulls’ hopes for the reflationary policy, which could have been performed along with the presence of the ‘blue wave’, haven’t met the reality. That is why the speculators are exiting the gold longs.

Finally, if the information about the effectiveness of the OCVID-19 vaccine is true, the global economic recovery will drive the global bond market rates up and encourage investors to sell off the [XAUUSD][1]. Gold uptrend might recover only if the dollar is weak, but that will hardly happen soon. The dollar should weaken against the euro only provided the EU cancels the restrictions.

Monthly gold trading plan

I recommend holding down the shorts entered [at level $1965][2]. It will be relevant to add up to the sell positions if the price fails to break out the resistance at $1900 and $1915 or tests the supports at $1875 and $1860.

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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.

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