Gold Market Wire
News, analysis and commentary for gold traders and investors
Gold Market Opening
US Dollar Weakness Underpins Continued Metals Strength
July 31, 2020 - (Gold Market Wire) - The precious metals arena is continuing to hold on to recent gains,which is, in essence, a positive indication for the bullish element. Yesterday's move below $23 was quickly bought and our hourly chart formation is increasingly favouring a bullish stance.
A confluence of factors now: 1) the short-term horizontal has been regained - making yesterday's down-slide look like a weak sell-off. It was quickly bought. That hourly horizontal support has been regained and is starting to look like a solid (albeit short-term) indicator. More importantly: 2) The downtrend line has been exceeded, and while only 3 days in the making, it is pointing the market firmer. The bulls should be encouraged by the recent volume, which has been an excellent indicator of continued bullish sentiment and price direction.
But the real story lies in the continued weakness of the US Dollar, which is underpinning Gold's rise. That is not to imply a 1:1 causal relationship...Gold was rising anyway since January 2016 - and it continued to rise along with the US Dollar rally, which was significant. But, it is assisting the Gold rally. Indicators phase in and out of the market's consciousness, but right now, the relationship to the US Dollar is helping Gold. The internal dynamics of America are contentious to say the least, and the specter of a Democratic victory - presently a 50/50 shot - is keeping the dollar bears in charge. We don't see that changing anytime soon. If Trump loses, the US Dollar could be routed. The fulcrum of the US Dollar Index, the Euro, is revealing this growing possibility.
The chart formation now looks to be ready to make another leg up, which is going to help the Metals. We now have talk of postponing elections, the idea that the postal system could be used to "stuff" the ballot box and a host of other factors are all contributing to a US Presidential election that will be dogged by controversy. None of this will help the Dollar, but it will help its inverse monetary proxy - Gold (and Silver). The market is also now digesting an additional factor, namely, that the outcome of the US Presidential election wll be rejected by the losing side no matter what...leading to either continued left wing rioting and chaos across the nation's cities (if Trump wins) or the establishment of true sepratist movements (if Trump loses). It is a no win situation for the country, which is drifitng into civil unrest on a colossal scale.