Gold takes a breather
- The US Federal Reserve is likely to cut rates towards zero
- US-China trade war raising recessionary risks
- Nominal and real bond yields expected to stay low and, in some places negative. Thereby removing the opportunity cost associated with holding a non-coupon and non-interest paying asset.
- Continued buying by central banks looking to diversify and for some to reduce the dependency on the dollar, so called de-dollarization
- Bullion backed ETF buying reducing the availability in the physical market. Year-to-date total ETF holdings of gold has risen by 8.2 million ounces. Still well below the 14.7 million ounces that was added in 2016
- The dollar is potentially on its final leg of strength with the emerging risk of US action to weaken the Greenback
- The chart below shows the risk of a retracement back towards the $1450/oz, a level which would still only reflect a weak correction within a strong uptrend. It would take an unlikely break below $1380/oz, the multi-year resistance area turned support, for the technical outlook to turn back to negative.
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