Gold rally, sustainable or not?

For all gold fans, the current jump in gold prices is very pleasing, and many have come. After all, all tensions on the world market were not exactly enough to calm the stock markets and thus investors. China, Iran, the US President stomps vigorously through the global political store. Gold was boosted by the FED’s likely renewed and early interest rate cut, as much of US economic data does not provide a rosy testimony to the country’s situation.

It is therefore foreseeable that in the foreseeable future, possibly already in July, monetary policy will be eased by lowering interest rates. In light of this, yields on the 10-year government bond are declining sharply in the US. Which means that the capital’s haven of refuge, so beloved, is losing its appeal.

While stock markets in the US are still near the all-time high, and a rate cut could still provide a short boost, considering the average pathways to US economic growth, a recession becomes more likely. The interest rate cut should thus only suffice to temporarily alleviate the painful setbacks that are to come.

If the main investment groups, bonds and equities, fall away in a recessive phase, the way would be cleared for closing the then again “safe haven” gold in the investor’s heart.

From a technical point of view, too, it was important to keep an eye on the long-standing resistance of 1,350 USD per ounce of gold, which was clearly cracked for the first time. But can it be sustainably defended?

Both the RSI, as well as the volume indicator and the stochastics point to the north and are thus solid buying signals, which point to a medium-term price increase. Thus, the way would remain free for the time being until the next resistance in the range of 1,430 USD – 1,450 USD per troy ounce of gold. However, this brand should establish itself sustainably over the summer as a new stepping stone, since otherwise after the strong increases course corrections up to the range of approx. $ 1,300 per troy ounce. Although this would not interrupt the overall positive gold price trend, from today’s perspective, the further course would no longer be clearly recognizable. A consolidation period in the range of $ 1,300 to $ 1,350 per ounce would therefore be the most likely scenario before a new development becomes apparent.

Since the foreseeable trend in interest rates is accompanied by a weakening of the US dollar, which should gain strength as the recession approaches, the way would be clear for a further positive development in the price of precious metals. But it is still too early to speculate. As it is well known that those who are said to have lived longer than expected, patience is required to discuss a recession in the US market. From today’s cautious point of view, however, we will write at least the year 2020.