Gold price (XAUUSD) dropped slightly during the Asian session. The metal is trading at $1797 per ounce, which is below this week’s high of $1,807. Still, several analysts believe that the rally in gold is just getting started.
Why gold price has been gaining
There are several reasons why gold price (XAUUSD) has been in a sharp upward trend. First, the overall mood in the market has been relatively upbeat in the past few months. This has seen many indices pare back their previous losses. For example, in China, the Shanghai Composite index has been surging in the past few weeks. Similarly, the Nasdaq index has jumped to an all-time high. In most times, gold price tends to do well in a bull market.
Second, the recent actions by the Federal Reserve and other central banks has been supportive of the metal. In reaction to the coronavirus pandemic, the bank has unleashed most tools in toolbox. It has brought interest rates to zero and started an open-ended quantitative easing program. In this program, it has even started buying corporate bonds. All these measures have weakened the US dollar and pushed XAUUSD pair higher.
Third, the current surge of coronavirus cases in the United States has helped gold price. That is because it will affect the ongoing recovery and possibly push the Fed to implement other monetary policy strategies, including negative rates.
Additionally, the disruption of mines, upbeat statements by analysts, and increased liquidity in the world market has helped push gold price higher.
Now, more respected analysts believe that gold price rally is getting started. In a recent interview with CNBC, Michael Novograts, who is known for his crypto analysis, said that he expects the metal to continue rising. He said:
“The Federal Reserve and central banks around the world just keep printing money – more money, more money, more money. And so, gold is going to take out the old highs, $1,950 or something, and it is going to keep going. I think we are just starting this move.”
He is not alone. In an interview with CNBC, Michael Howell, the CEO of Crossborder Capital, said that gold price will continue rising as more people seek to diversify from stocks. He expects the price to rise by 50% to $2,500 in the next 18 months.
Another analyst, Boris Schlossberg said that the rally will continue rising. He said:
“The rally in gold has been very orderly and steady, so it really shows that this is a very much a long-term investor bid right now.”
XAUUSD technical outlook
Gold price is trading at $1796. On the daily chart, the price is above the 50-day and 100-day exponential moving averages. The index has also formed an equidistance channel that is show in the red and blue trend lines.
Therefore, at this price, the price of gold is approaching the lower side of the channel. This means that the price could continue falling as bears target this level. After this, the price is then likely to continue rising.
On the flip side, a move below this support at about $1780 will invalidate the long-term upward trend.