Forex Analysis & Reviews: 07.08.2024 - Gold's mission fulfilled

Live Chat

InstaForex - Official partner of Dragon Racing

This section features the most important information about trading with InstaForex. We provide both analysis from leading experts for experienced traders and articles on trading conditions for beginners. Our services will help increase your profit potential.

Become Trader

Account Opening

See also

Trading Conditions

Forex Analytics

Charts

This section is designed for those who are just starting their trading journey. InstaForex educational and analytical materials will meet your training needs. Our experts' recommendations will make your first steps to trading success simple and clear.

Start as Beginner

How to start trading

Useful information

Training and recordings

InstaForex innovative services are an essential element of productive investment. We strive to provide our clients with advanced technical capabilities and make their trading routine comfortable as we are recognized as the best broker in this regard.

Become Investor

PAMM System

ForexCopy System

Passive investments

OYS account

Partnership with InstaForex is beneficial and top-tier. Join our affiliate programs and enjoy bonuses, partner rewards, and the possibility to travel with the team of the world-renowned brand.

Become Partner

Main Page

Partner Area

Advantages for Affiliates

Registration

This section contains the most lucrative offers from InstaForex. Receive bonuses when topping up an account, compete with other traders, and get real prizes even when trading in a demo account.

All Promo Campaigns

Bonuses

Contests

Events

Holidays with InstaForex are not only pleasant but also useful. We offer a one-stop portal, numerous forums, and corporate blogs, where traders can exchange experiences and become successfully integrated into the Forex community.

Full details

Forums

We are in social networks

Forex humour

Forex Portal

InstaForex is an international brand created in 2007. The company provides services for online FX trading and is recognized as one of the world's leading brokers. We have won the trust of more than 7,000,000 retail traders, who have already appreciated our reliability and focus on innovations.

Learn More

History

Why Choose Us

InstaSport

Regulation

Company News

Awards

InstaForex Stars

InstaForex Offline

Headquarters

Key documents

Social Responsibility

InstaForex Loprais Team - Official participant of the Dakar rally

07.08.2024 11:16 AM

Gold's mission fulfilled

What happened? Instead of soaring to new record highs, gold plummeted below $2,400 per ounce amid a roller coaster across global financial markets. The global stock market crashed with Japanese stocks suffering the heaviest losses. This collapse made investors recall Black Monday in 1987. In theory, market participants should have rushed to buy up safe-haven assets. But that didn't happen!

For most of the year, the precious metal developed a rally despite strong headwinds. The robust US dollar and rising Treasury yields typically pose challenges for gold. However, the metal confidently traded higher and higher thanks to active purchases by central banks, high demand in Asia, and expectations of monetary easing by the Federal Reserve. The latter factor catalyzed the best capital inflow into ETFs since March 2022 in July, despite the first half of the year being the worst for gold-focused ETFs since 2013.

Capital flow dynamics in gold-focused ETFs

If the precious metal managed to strengthen against headwinds, it was bound to soar with tailwinds! And market panic seemingly created an excellent opportunity to buy XAU/USD. Alas, the bulls were forced to retreat.

In reality, the issue lies in the speculative nature of various trading instruments. Whenever there is a rapid sell-off, gold commonly bears the brunt. Investors holding it as a hedging instrument in their portfolios sell it to meet margin calls on other instruments, primarily stocks. Once the dust settles, traders buy the precious metal again.

Goldman Sachs agrees with this view. Indeed, the need to avoid margin calls forces investors to get rid of gold temporarily. Commerzbank notes that the XAU/USD decline was driven by sell-offs of other assets. JP Morgan recommends buying the metal on dips.

There is no real reason for panic. Even if a recession hits the US, gold will benefit as a safe-haven asset. It will capitalize on the weakness of the US dollar and the drop in Treasury yields. As evidence, we remind you of the capital inflow into ETFs of 125,000 ounces during Black Monday.

If the Federal Reserve ensures a soft landing, the US economy will still cool down. So, the federal funds rate will be slashes. This creates a favorable environment for XAU/USD. Donald Trump's victory in the presidential election in November will boost demand for gold as a safe-haven asset. On the contrary, his defeat will allow the Federal Reserve to ease monetary policy with a clear conscience, which is great news for the precious metal.

Technical analysis of gold

Technically, a Double Top reversal pattern was played out on the daily chart, leading to a correction. However, this does not indicate a trend reversal. So, it is advisable to wait until the price recovers above $2,408 and $2,416 per ounce for buying opportunities.

You have already liked this post today

*Disclaimer: The market analysis posted here is meant to increase your awareness, but not to give instructions to make a trade.