Gold is looking for an excuse to go higher…
Gold is looking for an excuse to go higher…
…And that excuse is the devaluation of the dollar. Gold is not immune to fundamental events. However, recently has been sideways for the most part of two months.
Gold and the election
A theme revolving around Biden’s win is the dollar’s devaluation, with many banks calling a drop in the dollar if Biden is elected. Given the historical precedent of Gold rallying on dollar weakness, a Biden win may push the yellow metal higher. Furthermore, a sell-off in the equity markets on a Biden win may give Gold’s tailwinds as investors and traders switch to risk-off.
Commerzbank Analyst Daniel Briesemann stated that the “Market will not doubt follow the talks in Washington very closely,” and that “Gold could profit in the event of a deal because the U.S. dollar would presumably be in less demand then and would probably depreciate”.
It is a simple recipe that revolves around the dollar’s devaluation and its historically inverse relationship with Gold. Stimulus and Support from the U.S. government and the Federal Reserve are likely to depreciate the dollar, pushing Gold higher. Furthermore, a Biden win may incentivize a further sell-off in the U.S. dollar, again, pushing Gold higher.
Gold technicals are looking strong
Currently, Gold is sitting at $1,922 an ounce – Right on a very strong support/resistance level. It has been on a strong upwards trend from a drop in the previous symmetrical wedge. Furthermore, the highs to the trend’s low constitute a full Fibonacci retracement. A break of the $1,958 level, which is another strong support/resistance level and is right on the 50% fib retracement level, before the election, may see Gold rally back to its all-time highs and seek further targets of $2,204.
However, a Trump win on election day may see a sell-off in Gold, with prices breaking the upwards channel down back to a full retracement to $1,847
Are you looking at Gold?
Four years have passed, and now we usher in a new United States President: Joe Biden. A complete U-turn from what Donald Trump stood for. Nationalism is now replaced with Progressive politics. The question arises, how will President Joe Biden’s 100-day agenda affect the markets?
Stocks coming into 2021 – Boom or Bust?
Here are two fun facts from equities in 2020.
· The NASDAQ returned 46% from the start of 2020. If you purchased at the peak of the recessionary period in mid-March, you would’ve made a return on investment of 85%.
· Meanwhile, the S&P500 only returned 17% from the start of 2020.
· The average price/earnings ratio for stocks in the NASDAQ was pushing 23
· The best performing stock that is in the S&P 500 and NASDAQ was Tesla, providing a 743% Return.
With that in mind, what are we expecting for stocks coming into 2021?
The Dollar has been experiencing some love coning into the new year, with the DXY up just under 1%. However, is this just a technical rebound, or is there substance for a further rally?
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