GOLD PRICE WEEKLY TECHNICAL FORECAST – NEUTRAL
- Gold forecast hinges on the hopes of a fiscal stimulus deal and corresponding swing in the real yields
- Gold price volatility might continue with uncertainty surrounding the fiscal stimulus and coronavirus linger
- Gold may still be supported broadly as the federal reserve balance sheet hits an all-time high
Gold price action oscillated in a 2% range over the past 5 trade sessions to finish flat this week. Gold continues seeking the bullish catalyst in order to spark a breakout from the consolidation pattern and with the current murkiness that surrounds the fiscal stimulus talks, the prices of gold might keep drifting sideways
GOLD PRICE FORECAST HINGES ON EXPECTATIONS OF INFLATION
Despite the significant surge in US Treasury rates in the past few weeks, the gold price has notably stayed afloat largely because of the increased inflation expectations. Technically, the 50year forward inflation rate has risen 2.19% that marks the new post-crisis high and helps retain pressure on the real yields. The hopes of inflation are increasing faster than the interest rate causing the yield rates to shift low, showing a bullish fundamental factor for prices of gold.
The expected inflation has the possibility to gain some more ground with the possibility of another detailed fiscal stimulus package before the November 3 election. Incase the US solicitations can make a deal; gold prices might stage a new move high with the inflation expectations as US Dollar Plunges As Markets Seek Certainty on US Fiscal Stimulus.
Even if a deal on the aid fiscal aid cannot be reached before the election, the inflation expectations might remain relatively raised incase the odds of a Democratic sweep remain the same mainly because this will correspond with a much bigger stimulus deal next year. The possibility of a gridlocked congress might undermine inflation expectations and weigh negatively on the gold price rally.
The resurfacing covid-19 concerns as newer cases spike and the government impose more restrictions on the business activities that present another bearish threat to the gold forecast. On the other hand, the inflation expectations and gold prices might remain bolstered by the Federal Reserve balance sheet.