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Top Trade Idea 2020: Long Gold as Central Banks Remain Accommodative and Inflation Rebounds

Top Trade Idea 2020: Long Gold as Central Banks Remain Accommodative and Inflation Rebounds

Rich Dvorak, Analyst

The performance of gold was quite solid in the first half of 2019 and even outpaced the rally in major equity indices like the Dow Jones for part of the year. Yet, a rebound in sovereign yields since September – spurred largely by a flood of risk appetite in response to an apparent de-escalation in the US-China trade war – weighed negatively on spot gold prices due to the inherent relationship between bullion and interest rates.

GOLD PRICE CHART (AUGUST 2006 TO DECEMBER 2019) (Chart 1)

XAUUSD Chart

The rally in spot gold prices ran out of steam on September 04 when the commodity printed its 2019 high near the $1,555 mark, which aligns roughly with the September 2011, December 2011 and May 2012 monthly lows. This area of technical confluence is also underpinned by the 61.8% Fibonacci retracement level of the August 2011 to December 2015 bearish leg recorded by spot XAU prices.

-- Written by Rich Dvorak, Junior Analyst for DailyFX.com Connect with

@RichDvorakFX on Twitter for real-time market insight

DailyFX provides forex news and technical analysis on the trends that influence the global currency markets.

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