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Gold Price Fundamental Outlook Bolstered by US Dollar Weakness

of clients are net short.

Change in Longs Shorts OI
Daily 3% -1% 2%
Weekly -11% 38% -3%

What does it mean for price action? Get My Guide GOLD PRICE CHART WITH US DOLLAR INDEX OVERLAID: DAILY TIME FRAME (25 JUN TO 06 NOV 2020)

Chart by @RichDvorakFX created using TradingView

Looking forward, gold has potential to continue climbing with precious metals surging as the US Dollar sinks . The US Dollar might remain under pressure with expectations for stock market volatility down-throttled, which by extension, could open up the door to higher gold prices. This is seeing that the price of gold generally maintains a strong inverse relationship with the US Dollar. An accommodative Federal Reserve further underscores the anti-fiat narrative with FOMC asset purchases set to continue at the current pace and push the Fed balance sheet further above the $7-trillion mark.


Recommended by Rich Dvorak Forex for Beginners Get My Guide GOLD PRICE CHART WITH 5-YEAR REAL YIELDS OVERLAID: DAILY TIME FRAME (01 JAN TO 06 NOV 2020)

A breakout in real yields might give gold bulls a headache, however. Gold price action tends to move in the opposite direction of real yields as illustrated in the chart above. Wavering inflation expectations could present a headwind to gold price action, which could gain traction if stimulus deal hopes fail to materialize.


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Also, as coronavirus concerns flare up again, the threat of a material slowdown in business activity has potential to undermine inflation expectations and steer gold prices lower. That said, it seems like the direction of the US Dollar is the dominant driver of gold price action at the moment with precious metals broadly mirroring the Greenback.

— Written by Rich Dvorak , Analyst for DailyFX.com

Connect with @RichDvorakFX on Twitter for real-time market insight

DailyFX

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