Gold Price Forecast Remains Encouraging on Ever-Expanding Stimulus

Gold Price Outlook:

• Gold has climbed nearly 30% in the year to date as central banks fill the global economy with stimulus
• With little end in sight, gold may continue to benefit from looser monetary policy and low interest rates
• That said, gains may require periods of consolidation before resuming higher

Gold Price Forecast Remains Encouraging on Ever-Expanding Stimulus

Gold rounded out the month of August on a quiet note, maintaining a relatively tight trading range compared to some of its volatility in months past after a troublesome start in early August. Nevertheless, the precious metal was able to recoup some of its earlier losses and enjoys a technical position that may be constructive for further gains. Further still, the fundamental tailwinds that have helped gold climb remain in play.

Data Source: Bloomberg. Compiled by John Kicklighter

To that end, stimulus from the world’s leading central banks continues to grow as they look to revive their respective economies in the wake of covid-19. With a period of low interest rates and expanding balance sheets ahead, fiat currencies may continue to shed value relative to other stores of value like gold and silver.

Thus, the longer-term outlook for gold remains encouraging in my opinion and periods of weakness may allow for attractive trading opportunities as they might act as mere consolidation before a continuation higher. With that in mind, traders should track nearby support as the levels could offer enticing risk-reward opportunities.

Gold (XAU/USD) Price Chart: 4 – Hour Time Frame (November 2019 - September 2020)

As it stands, nearby support may reside along the ascending trendline from May – around $1,932 – while a subsequent Fibonacci level at $1,920 could offer secondary support. Together, the areas of potential support might help keep gold prices afloat in the event of a bearish reversal. In addition to the previously outlined levels, technical influence may also be derived from the August swing low around $1,863.

A bearish breach of the $1,863 level might warrant a reconsideration of the broader technical backdrop, as it would establish a lower-low and could mark the beginning of a larger bearish trend. Without such a development, both the technical and the fundamental backdrops look encouraging for further gold strength in the weeks to come. In the meantime, follow @PeterHanksFX on Twitter for updates and analysis.

--Written by Peter Hanks, Strategist for DailyFX.com

Contact and follow Peter on Twitter @PeterHanksFX