Dailyfx analyst Justin McQueen commented today on a development that could put pressure on the Gold price.

 

 

Gold prices increased for 2 weeks in a row, indicating that the precious metal is trying to create a base. The Federal Reserve pointed out that the pandemic poses significant negative risks in the near term, showing little signs of pulling off the gas and reiterating that it is too early to talk about a reduction in asset purchases.

 

Gold Price Outlook Is Favorable

However, the outlook will remain positive for precious metal, especially as US real returns remain below -100 basis points. However, while gold prices stabilized, the upside was largely limited by a renewed bid for the dollar.

The US Dollar showed temporary signs of recovery, with DXY holding a foot above the 90.00 level.

In contrast, the US dollar tested the descending trend line resulting from the March peak. The stock markets have had a tough week with the relentless short squeeze pressure seen on Reddit favorites (AMC, GME).

However, a somewhat underreported factor is the depletion of liquidity in Chinese markets, which the PBoC advisor has pointed to concerns over asset bubbles. If the stock market’s leverage decreases faster, the safe haven flow to the USD poses a risk to gold.

 

This week

Looking to the next week, with a new month, regular NFP data will be closely monitored and ISM PMIs will also attract attention, which may lead to a revision of the US growth prospects.

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