Will the gold market surpass historic peaks?

Currency market it is now a place that is currently undergoing considerable consolidation - the ceiling, the floor, which will be hard to break in the near future. The holiday period is not favorable for volatility. Certainly, volume reports for July will be weaker than in the previous months. Gold while it may turn out to be the most expensive "currency" in August. The euphoria on precious metals, despite corrections in indices, remains in a very good condition. The market is not slowing down and there are many indications that it is possible that in the near future we will witness the historic gold peak.

The dollar supports gold quotes

Surely a broad market and most traders know the correlation that exists between gold and the dollar. Usually, the depreciation of the dollar in the broad market has an impact on a greater room for gold appreciation. Clear sales pressure on USD. Just look at the USD Futures contract.

Source: Finviz.com

The most interesting place to look at is the USD Index, found directly below the Futures chart. Commercial Hedgers are clearly short (implicitly hedging long exposures). Nevertheless, this trend has continued for some time.

Even looking through the fundamental and geopolitical prism, both the growing tensions between China and the US and the uncertainties in the context of the second wave of the coronavirus do not attract investors to the US currency. So you can ask yourself. What needs to happen in the world for the dollar to be the focus of investors again?

Profitability stands still

The situation on the US debt market also works in favor of gold. In recent weeks, the situation on yields has remained virtually unchanged, which is certainly not attractive for potential investors (in terms of earning on their volatility). The strong share of the US central bank in the debt market has certainly had a strong impact on the current situation in terms of profitability. High stimulus packages together with a large share of the state in the debt market and low interest rates created a very good environment for the growth of precious metals. Any negative geopolitical issues that arose from the US-China conflict were priced in gold, not the dollar as it used to be.

The situation in Europe is assessed by many analysts as one that aims at a gradual recovery of the economies. The United States has moved a bit to a "different level" in the context of the trade. The great vision of a rapid recovery began to turn into fears of a long-lasting slowdown, which the US did not feel as much as the Old Continent (practically from the second half of 2019).

The gold market has strong foundations, but ...

It is true that the gold futures have looked very interesting in recent weeks. They show a clear increase in interest. Fundamental factors support strongly current prices and it is not surprising that the broad market is hoping to hit historical levels.

Gold market, MN interval. Source: xNUMX XTB.

For now, one of the threats to further increases is information about the coronavirus vaccine. Admittedly, there are no official announcements on the market yet. One of the best vaccine production facilities in the US reported (initially) that the results of Phase 3 testing were impressive (positive). This is obviously a real risk to the price of gold. However, it should be added here that this is a factor that will not materialize quickly. Accordingly, this information can be heeded, but should not jeopardize the current euphoria.