Gold is on the way to $1836.70. Comments by Federal Reserve chairman at the Federal Reserve meeting is the reason. Correction of gold price in US session will come only if US weekly jobless numbers beats street expectations by a big margin. Selling gold and silver on the basis of US May nonfarm payrolls has resulted in short covering yesterday post FOMC surprise.
I was focused more on copper and silver (on a personal trading) since the last two months. Silver and copper returns are over twenty five percent in silver and copper from 31st march close. These metals give two big buying opportunities ever year and two big selling opportunities every year. Made at the right time, just four trades in copper, nickel and silver gives over hundred percent returns every year.
Highlights of Federal Reserve chairman's comments
1. Need to keep the key interest rate near zero through at least 2022.
2. U.S. gross domestic product is expected to decline 6.5% this year.
3. Shutdowns, restrictions and other measures used to battle a health crisis will echo through the economy for years to come rather than be quickly reversed as commerce reopens.
4. The ongoing public health crisis will weigh heavily on economic activity, employment and inflation in the near term and poses considerable risks to the economic outlook over the medium term.
5. Much remains uncertain, particularly the progress of the pandemic, the fiscal and monetary response has been working well so far, maintaining income support for the unemployed and limiting business failures so far. More may be needed.
My view on FOMC meeting based on above points:
Forget about a "V" shaped recovery. Traders have factored in a "V" shaped global recovery. At the beginning of February. I had said of a "U" shaped economic recovery. Yesterday I changed it to "W or 2 V" shaped global economic recovery. Gold will rise or remain firm. The pace of rise will change every fortnight, every month and every quarter. But gold will continue to give positive returns every month and every quarter.
Interest rates near zero to 2022 implies that US dollar will sink. Not just gold, silver, energies and industrial metals will rise or remain firm supported by greenback weakness.
Global stock markets, bond yields, metals prices, energy prices and even the US dollar Index can all rise at the same time. Risk taking is historical. Unemployed with savings are using their savings to trade and invest in order to survive. Money is freely available. Frequent boom-busts will be there in selected stocks, commodities, bond prices and even certain currencies due to excess free money chasing too few profitable investment.
What can cause a selloff in gold price? US jobs beating street expectations. US employment numbers from June to August is the key. US jobs numbers (weekly, ADP, NFP, challenger job cuts among others) have to continuously beat street expectations in June to August period for gold prices to sell off. In the long term, I do not see gold prices fall below $1475 (under worst case scenario) with every possibility of $2061 and $2386.70 as price target. Risk to return ratio favors gold buyers.
COMEX GOLD AUGUST 2020 - current price $1741.60
Bullish over $1730.60 with $1753.80 and $1779.10 as price target.
Bearish below $1720.10 with $1707.00 and $1696.50 as price target
? Gold can rise to $1775.30 today as long as it trades over $1720.10,
MCX GOLD AUGUST 2020 - current price Rs.47170.00
? Trend is bullish. Key resistance is at 47416.
? Gold needs to trade over 47416 till Monday to rise to 48269 and 49122. (new all time highs).
? Sellers will be there below 46969 and crash only if gold trades below yesterday's close of 46626.
(prices in Indian rupees above)
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NOTES TO THE ABOVE REPORT
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