Regarding investment securities, the gold market has become one of the most recognized and developed. It has historically been a precious resource, and its main users are jewelry and electronics. Still, as a market, it is frequently seen as a wonderful place of refuge and investors often choose to trade gold for various reasons.
Gold trading is a fantastic buffer against financial difficulties since it functions as a place of refuge investment, one that frequently swings in anti-correlation to the established markets. Still, it is also an investment that has demonstrated consistent and steady value appreciation for a long period.
Although gold is not a volatile or prone to large price swings asset, it is known to practically always expand as its applications and market demand continue to grow. The markets are frequently worth monitoring because gold is a precious asset with an unpredictable supply, and projecting gold prices over the next 10 years can frequently result in profits over this extended period of time.
Gold Price Advances to Approach September High
As Treasury yields continue to decline, gold prices rise to a new weekly high ($1730). The precious metal may make a stronger comeback over the next few days as the Relative Strength Index (RSI) keeps moving back up from overbought territory.
Since the adverse momentum has subsided, the price of gold may try to recover its loss from the August high ($1808), but it is still unclear whether the rise from the annual low ($1615) is the start of a significant turnaround given that the rolling average still has a negative gradient.
The Non-Farm Payrolls (NFP) report is likely to reveal a further recovery in the labor market, with the economy forecast to add 250K jobs in September following the 315K growth the month in advance. Thinking forwards, new developments coming out of the country may have an impact on the price of gold.
The Personal Consumption Expenditure (PCE) Price Index indicates persistent price growth, so evidence of a robust labor market may encourage the Federal Reserve to maintain its approach to fighting inflation.
The price of gold may surpass the September high ($1735) as it continues the string of higher highs and lows from the previous week, but if it is unable to maintain its position above the 50-Day SMA ($1724), it may revert to the price movement of August.
Daily Gold Price Chart
- A break above the September high ($1735) would put the $1762 (78.6% expansion) to $1763 (50% regression) level back on the radar as the price of gold trades above the 50-Day SMA ($1726). The Relative Strength Index (RSI) is still recovering from an oversold position.
- While trading gold above the 50-Day SMA ($1724), the price of gold may attempt to retrace the slide from the August high ($1808), but if it fails to maintain above the $1726 (38.2% retracement) regions, the value of gold may track the negative gradient in the trend line.
- If gold fails to maintain its position above the daily average, price action could resemble that of August. A decline below the $1690 (61.8% regression) to $1695 (61.8% expansion) regions could lead to the $1670 (50% expansion) areas.
Factors Affecting the Price of Gold
Due to the fact that the gold market is so developed and well-established, a variety of factors determine the price of gold and how it is impacted. In addition, gold has a different approach because it is a relatively distinctive asset in comparison to commodities like bonds and stocks. Given that it functions as a hedge, one must search for variables that significantly impact other assets.
A few things to consider include protection against volatility, inflation, consumer demand, and gold. Some of the topics covered are interest rates and gold, the relationship between various asset classes, political effects, future demand for gold, and a declining dollar.
Demand for consumption is influenced by the ways in which gold is used as a commodity outside of its market. The price of gold is always fluctuating, and recently it has increased as technology companies have started using gold in their products to increase conductivity. In fact, gold is also utilized in jewelry, and demand is rising even from governments across the globe that wants to retain it in their central banks as a valuable asset.
As was previously said, gold is a commodity that offers some kind of protection from volatility. People who want to shield themselves against uncertainty and risk are in demand of gold. Because gold is a tangible asset that can be maintained and saved by private individuals, as well as because its market behaves differently from more market fluctuations, it is sought after by those seeking to hedge against risk.
Most traders would trade gold regardless of whether the home economy was expanding or experiencing a downturn, underscoring gold’s appeal as a financial asset for both positive and negative economic conditions. Gold and inflation go hand in hand because when inflation occurs, people would rather save their money for something that would appreciate in value rather than swiftly lose value, like gold. Gold, therefore, becomes a strategy to protect against inflationary situations in periods where inflation is high for a longer time. As a result, gold prices are expected to rise during inflation.
Risk and the possibility of loss will always exist in the world of trading. Gold is no exception, but it is also among the safest forms of investment. It is a resource that is always going to be in demand, whether for its use in jewelry or electronics.
Gold is another resource with variable but constrained availability. Furthermore, demand and price will keep rising due to the ongoing decrease in availability. Furthermore, the Covid-19 problem and the continuous demand for a safe refuge commodity will only make the elements that influence the prediction of the future price of gold more important.