After a steep and confident climb to an all-time high of $2060 in July, the trend of gold finally met with some resistance in August. Thus, the price rebounded from the maximum and dropped all the way to $1917, which is still quite a high price level. This week we have observed a mild recovery up to $1950.
The recent drop in the value of gold can be explained by the slight strengthening of the dollar, which managed to recover some of its lost ground in the past couple of weeks. The dollar is currently recovering due to the lack of a proper stimulus plan in the United States, where Congress is still debating its options. If and when more money gets pumped into the US economy, the USD will weaken and gold will be quoted at a higher price as a result.
In addition, the precious metal has every chance to continue strengthening in price, considering all of the various factors that increase market uncertainty among investors.
Arguably the most important development at the moment is the relationship between the United States and China, which has deteriorated in recent months. Today representatives of the two countries will hold a video conference to discuss their issues and the fate of the phase-1 trade agreement. If the meeting does not go well (the worst case scenario being the cancellation of the trade treaty), the markets will have a very negative reaction and the demand for safe havens will rise.
Another factor to influence the price of gold in the long term are the upcoming Presidential elections in the United States. Due to Donald Trump’s distrust of mail-in votes (which will be necessary because of the coronavirus pandemic) and the likely slow counting of the votes, experts anticipate the results from the election to be contested. Thus, it will be an even more volatile situation than elections in the US usually are. Expect the markets to talk more and more about the election in the ten weeks leading up to it.
Overall, the current outlook for gold is quite mixed, though the long-term forecast is that its price will grow. Today it would be best to sell it, but in the weekly term buying this asset will be more profitable.
