Forex Analysis & Reviews: 28.08.2024

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

28.08.2024 11:18 AM

Gold Will Shed Weight

Nothing lasts forever. Any trend needs a correction. Gold consumption in China's jewelry industry fell 27% in the first half of 2024, as the biggest problem became the rise in prices to record peaks with almost no pullbacks. Total demand for the precious metal fell by 5.6% to 523.8 tons. Where there is a void, the West is gradually replacing the East, but this does not mean a correction in XAU/USD won't happen.

Federal Reserve Chair Jerome Powell's fiery speech at Jackson Hole about the imminent start of monetary easing by the US central bank allowed gold to set a new record, but then a natural process of selling on facts began. The XAU/USD quotes already account for the Fed's varying pace of rate cuts compared to other central banks, so the ideal environment for the precious metal may deteriorate. We are talking about the dollar's weakness and falling US Treasury bond yields.

This combination allowed asset managers to increase their net long positions in gold to the highest levels in four years. Holdings of the world's largest specialized exchange-traded fund, SPDR Gold Shares, have been rising for eight consecutive weeks, the longest period of capital inflow since mid-2020.

Gold Dynamics and ETF Holdings

However, excessive speculative longs may become a thorn in gold's side. Their unwinding at the first sign of trouble could lead to quotes declining below the $2500 per ounce mark. Especially since the market increasingly realizes that the Fed's anticipated scale of monetary easing, as implied by derivatives, is clearly overstated. A 100 basis point cut in the federal funds rate in 2024 could still be explained by a recession. However, how can there be a recession when US consumer confidence soars to a six-month high?

Yes, in 2023 and the first half of 2024, the precious metal made gains even amidst a rising dollar and increasing US Treasury yields. Back then, it was supported by active purchases from central banks and strong demand from Asia, led by China. But now, with gold in Shanghai trading at a discount to London, relying on this support no longer makes sense.

Dynamics of American Consumer Confidence

The US dollar can capitalize on the uncertainty surrounding the US presidential election and geopolitics. The situation in the Middle East remains tense, and the USD index may rise due to increased demand for safe-haven assets.

At the same time, the long-term outlook for the precious metal remains bullish. By the end of 2025, the federal funds rate could fall to 3.5% amid a slowdown in the US economy. Demand in China is expected to recover gradually, and ETF holdings will increase.

Technically, on the daily chart of gold, the combination of the Three Indians and 1-2-3 patterns increases the risk of a correction. If the bulls fail to push quotes above $2515 per ounce, the risks of a continued decline will increase. It makes sense to hold shorts formed from this level.

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.