Gold demonstrates a moderate "bullish" attitude for the second day in a row, ignoring such an unfavorable factor as a revival of risk appetite due to optimistic reports on the fight against coronavirus. Theoretically, this was supposed to weaken the interest of players in the yellow precious metal as a safe asset.
The increase in the yield of the treasuries against the background of the increased risk appetite did not also impress the "bears" and did not affect the gold in any way.
Moreover, even the strengthening of the dollar, which is confidently heading upwards due to good statistical data on the United States, could not hinder the growth of precious metals.
Now, gold is receiving support at last year's highs near $1,550. As is often the case in the markets, the former serious resistance has become support.
"The bullish trend in the gold market will continue in 2020, and the precious metal will become a favorite in terms of profitability growth," experts at Bloomberg say.
"One of the main reasons for the increase in the cost of gold this year will be the weakening of the Celestial economy because of the coronavirus epidemic. Under these conditions, gold will be used as a protective asset. The recent rise in the price of precious metals in the area of six-year highs can be considered as a market recovery. Now, the next level of resistance will be the mark of $1,700 per ounce," they said.
However, there may be something more than a craving for "safe havens" on fears of a coronavirus from China behind the growth of gold.
Last year, the quotes of precious metal increased significantly due to the easing of the monetary policy of leading central banks. At the same time, lower regulators of interest rates and the resumption of their purchases of assets on their balance sheets as a result stimulate inflation. In turn, the acceleration of price growth has become more noticeable since the middle of last year, which is forcing investors to look for alternatives to bonds as a way to protect portfolios from inflation, against the backdrop of near-zero rates.
In addition, a similar traction also explains the record volumes of assets in the "golden" ETFs, the inflow of funds to which increased at the end of last year.
Central banks are also building up gold reserves. Behind their actions is the desire to diversify their reserves amid growing concern over the increasing debt burden of the United States, Japan and the eurozone.
Now, the question arises on the agenda: what will happen next with accumulated debts? First of all, thoughts come to mind that the easiest way to reduce the debt burden will be the desire of states to put pressure on their own currency. This is a kind of analogue of competitive devaluation, only in a more manageable form, through the super-soft monetary policy of central banks. A side effect of this strategy will be the appreciation of commodity assets, primarily gold, as insurance against inflation.
In 2019, the precious metal rate increased by about 17%. The repetition of this dynamics in 2020 opens the door to growth in the region of $ 2,000 per 1 ounce, which will be higher than the record levels of 2011.
The material has been provided by InstaForex Company - www.instaforex.com