- XAU / USD holds bullish territory over the longer term, but temporary strength in the greenback has triggered short-term speculative gold positions.
- The Jackson Hole has a lower confirmed for longer holding at the Fed, gold to benefit from lower yields.
Gold markets had seen volatile price actions leading up to the Jackson Hole event with spot prices trading in the range of between $ 1,910.23 and $ 1,976.65 per day.
At the time of writing, gold is trading at $ 1,931, down 1.19% on the day when the US Dollar Index, (DXY), returns the 93 manual after falling to a low of 92.42.
Gold was heavily bought up in 2020 as investors sought a safe haven given the geopolitical tensions and risks associated with the spread of the coronvirus.
At the same time, however, markets had been expecting much weaker dollars, such as lower US yields due to the change in the pace of the Federal Reserve and well-telegraphed reduction benefits.
Stock bearing
In the much-anticipated speech by Fed President Jerome Powell, it was confirmed that the Fed has been telegraphing longer, lower rates.
Powell confirmed that the Fed will strive for inflation to average 2% over an unspecified period, which essentially means that the Fed does not expect higher inflation.
Gold is not a hedge for deflation, but given the macro backlash and the prospects of real tariffs being suppressed, the environment for precious metals remains favorable.
Moreover, the US dollar has now officially lost its advantage over trading, as noted by analysts at TD Securities, but warns that it does not mean it is due to a reversal:
The move to AIT is hardly a surprise, but reinforces that the real yield advantage of the USD has been lost.
This poses a challenge to the USD from a cyclical perspective and gives more confidence to push away the longer overvaluation of the USD.
Tactically, USD shorts are deeply entrenched, but that does not mean it is going for a reversal.
On gold, analysts argue that trend followers remain well-positioned to take advantage of further increases in the complex, and the bar for major liquidations is high given extreme readings are on the rise.
Gold levels
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