Gold Price Forecast:
- ETF holdings of gold have surged in recent weeks as the precious metal enjoys steady demand
- Meanwhile, the price of gold is relatively unchanged from two months ago
- The continued buildup in gold holdings is an encouraging sign as the laws of supply and demand look to buoy price
Gold Price Forecast: XAU/USD ETF Holdings Surge to 6-Year Highs
Gold has climbed 17% in the year-to-date as rampant uncertainty has spurred demand for the relative safety offered by the metal. Alongside price, the total known ETF holdings of XAU/USD have also surged – boasting the highest ETF ownership of the commodity since February 2013. Since the beginning of the year, total gold holdings via exchange traded funds has increased by about 13.7%, which equates to a market value of nearly $13.3 billion. Although price has leveled off in recent weeks, the continuous demand for the yellow metal in the ETF market could work to serve as a bullish driver for the future.
Gold Holdings Continue Their Climb to 6-Year Highs
Data source: Bloomberg
With investors purchasing more than 1.2 million troy ounces of gold since last week alone, the hearty demand stream has shown no signs of slowing alongside price. While the exchange traded fund market does not reflect the entirety of the metal’s supply and demand profile, the two data sets do maintain a statistically significant 0.74 positive correlation dating back to early 2009. Thus, a sustained increase in holdings should eventually act as an upward drag on prices.
Gold Holdings Outpace Price
Data source: Bloomberg
That said, it is not immediately clear whether the relationship will return to prior norms due to a decline in holdings or an increase in price, but the fundamental landscape would suggest the latter is a key possibility. A speech given by Fed Chairman Jerome Powell on Tuesday alluded to an expansion of the Fed’s balance sheet, a decision that would effectively undermine the US Dollar’s position – typically a bullish development for gold prices.
Learn the Tips and Tricks of Trading the Gold – Silver Ratio
Therefore, gold’s price may continue to rise in the longer term despite its current tepidity. Nevertheless, traders should keep a watchful eye on ETF ownership of the precious metal. Any indication that demand has started to taper off could translate to a quick retracement in gold. In the meantime, follow @PeterHanksFX on Twitter for a deeper look at the ETF holdings of both gold and silver.
–Written by Peter Hanks, Junior Analyst for DailyFX.com
Contact and follow Peter on Twitter @PeterHanksFX
Short-Term Rally May Run Into Resistance
EUR/USD Price, Chart and Outlook
- EUR/USD rallies off the 50-day moving average.
- Any Brexit-boost may see the pair test near-term resistance.
EUR/USD: 50-Day Moving Average – Resistance Turning to Support
The daily EUR/USD chart is showing a few conflicting signals of late, leaving a decisive break unlikely in the near-term. While the rally off the October 1 multi-month low at 1.0879 looks well supported, the pair are starting to run into resistance which should stem further upside. The pair however are benefitting from one technical indicator which may well limit any notable downside.
EUR/USD made a confirmed break above the 50-day moving average (blue line on chart) at the start of this week, for the first time since mid-July. The 50-dma has capped the pair for most of the year, while the 200-dma has acted as even firmer resistance aside from a breakout between June 21 and July 1. The 50-dma now turns to support for EUR/USD, while the 200-dma is the next important upside target.
The recent rally has broken a series of lower highs, confirming the shift in momentum, and a close above the 1.1250 lower high made on August 6 would change the medium-term outlook for the Euro to positive. A cautionary signal from the CCI indicator which shows that EUR/USD is currently heavily overbought.
Looking ahead the economic calendar has some important data releases next week including Eurozone consumer confidence, German and Eurozone PMIs and German IFO numbers. Of more importance will be the latest ECB monetary policy meeting and press conference on Thursday – President Mario Draghi’s last meeting – and the EU Commission Economic Forecasts on Friday, both notable market moving events. Resistance and support levels may come under pressure from any of the events noted above.
EURUSD Daily Price Chart (January – October 18, 2019)
IG Client Sentiment shows that traders are 51% net-short EURUSD, a bullish contrarian bias.
However recent daily and weekly positional changes give us a mixed outlook for EUR/USD.
What is your view on the Euro and the US Dollar – bullish or bearish?? You can let us know via the form at the end of this piece or you can contact the author at email@example.com via Twitter @nickcawley1.
EUR/GBP May Rise if Brexit Hopes Continue to Fade
British Pound Outlook, Brexit, GBP/USD Technical Analysis – Talking Points
- British Pound may reverse recent gains if Brexit perils undermine confidence
- UK members of Parliament will be voting on Boris Johnson’s new Brexit plan
- Will DUP derail Johnson’s plan, and if so, will there be yet another extension?
Learn how to use political-risk analysis in your trading strategy!
The Euro may edge higher against the British Pound if hopes for an orderly Brexit continue to dissolve. On October 17, UK Prime Minister Boris Johnson and European Commission President Jean-Claude Junker jointly announced that a Brexit deal had been reached. Sterling rallied on the news, though its upside movement was curtailed by news that the Irish Democratic Unionist Party (DUP) would not support his plan.
Securing their support is essential if Mr. Johnson wants to pass a deal through the House of Commons. If he fails to do so, it could severely derail plans for an orderly Brexit which would likely see the British Pound reverse a significant portion of its recent gains. However, EU Council President Donald Tusk has not ruled out the possibility of an extension if lawmakers failed to agree on a deal on Saturday.
In Parliament there are currently 287 voting conservative lawmakers which Mr. Johnson will need if his proposal is to survive. He may also have to lean on over 20 former Tory MEPs who switched over to become independents. However, that may not be enough votes which may compel the PM to ask for help across the political aisle.
Market Analysis of the Day: Will the British Pound Reverse its Recent Gains?
GBP Index chart created using TradingView
FX TRADING RESOURCES
— Written by Dimitri Zabelin, Jr Currency Analyst for DailyFX.com
To contact Dimitri, use the comments section below or @ZabelinDimitrion Twitter
Australian Dollar Firm After China GDP Miss But Trend Aims Lower
CHINA, GDP, TRADE WAR, AUSTRALIAN DOLLAR – TALKING POINTS:
- 3Q Chinese GDP registers narrowly worse than expected at 6.0% y/y
- Industrial production data, US trade talks may have offset the headline
- Australian Dollar little-changed but overall trend still pointing lower
Where will markets end 2019? See our Q4 forecasts for currencies, commodities and stock indexes!
The Australian Dollar found little of interest in mildly disappointing Chinese GDP data. The figures put the on-year growth rate at 6 percent, a hair lower than the 6.1 percent expected by economists. Nevertheless, this marks the slowest pace of expansion in at least 27 years.
Upbeat industrial production readings might have helped offset a soggy headline figure. The rate of on-year growth unexpectedly jumped to a three-month high of 5.8 percent. Early signs of stabilization in retail sales figures may have helped as well.
The report’s limited implications for larger macro themes dominating investors’ attention may likewise explain the tepid response. Extrapolating a view on future Chinese growth seems nearly impossible without greater clarity on trade negotiations with the US, making today’s release appear somewhat moot.
Assessing the broader landscape, choppy AUD/USD consolidation since early August leaves firmly intact a well-defined downtrend established from late December 2018. Prevailing monetary policy trends suggest it is likely to continue, with longer-term charts setting the stage for deep losses in the months ahead.
Daily AUD/USD chart created with TradingView
AUD/USD TRADING RESOURCES
— Written by Ilya Spivak, Currency Strategist for DailyFX.com
To contact Ilya, use the comments section below or @IlyaSpivak on Twitter
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