Gold traders of late have been keeping some of their bullish bets on, as interest rates continue to be on the lower side and the greenback staying close to its two-year lows.
However, the sudden surge in gold futures prices in these few weeks seems to have suffered exhaustion lately, especially around the $1980 -$1999 levels.
In addition, the precious metal could face strong short-term resistance at $2000 price level, given the growing view that the worst might be over and it’s unlikely for the U.S Federal reserve to want consider negative rates in the mid-term.
Gold bulls might start considering closing some of their long positions especially if the pullback reaches below the $1975 levels.
Making case for the gold bears is the recent upward rally in the greenback tracker, U.S dollar index staying above a critical support level of 93.5, as Dallas Federal Reserve Bank President Robert Kaplan said he would not be in favour of explicitly tying forward guidance inflation.
The yellow metal futures price presently remains around the price bandwidth of $1975-1985.
If the world is able to find a lasting solution before the end of Q3 2020, gold’s futures rally in the mid-term could fade, and drop below the $1,800 price levels. It will also be under downward pressure as global central banks can’t keep printing money, in solving some of the present global economic challenges.
Gold traders from a hedging perspective are more concerned about the level of inflation, not the changes in inflation.
However, from a level perspective, gold traders and global investors are of the opinion that inflation hedges like gold are probably a whole lot cheaper today.
The return of inflation is why the yellow metal is rallying at record levels, after years of sluggish movement in the precious metal market.