Gold long-term uptrend unaffected by massive sell-off last week

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Massing gold selling hit the market last week. Gold made a pullback of $200 and further price gains looked dubious. Equally steep sell-off was last seen in April 2013. Gold bears entered the market for obvious reason: the stellar rally of the precious metal and overbought market conditions.

Earlier, even adamant gold fans did not expect such a stunning gold rally. In fact, the metal surpassed the psychological level of $2,000 per ounce in just a month.

According to analysts at Standard Chartered, it is essential to figure out whether profit taking was a short-term tactical liquidation or whether investment in gold-backed ETPs becomes vulnerable.

This trading week, gold bulls were caught off-guard by a spike in the yields of US Treasuries. Not long ago, Treasuries' yields seemed to be doomed to a protracted downtrend. Another surprise event was a surprise bounce of the US dollar.

The background for these events was publication of the minutes of July's policy meeting of the Federal Reserve.

The following points in the content set the market in motion. The regulator dropped the idea of controlling the yield curve of Treasuries. Besides, the central bank confirmed a slow recovery of the domestic economy in the wake of the COVID-19-induced crisis. The Fed said it is ready to keep interest rates at almost a zero level long as necessary to shore up the economy. At the same, negative interest rates are inappropriate for the time being. Logically, gold should have skyrocketed under such developments. In practice, traders acted in the opposite way, having pushed yields of the benchmark 10-year Treasuries 2% upwards. In this context, the US dollar index jumped by 1 basis point to 93.

Next week, Fed Chairman Jerome Powell is due to make a keynote speech at the symposium in Jackson Hole. He is going to express the official stance on forward guidance for monetary policy. Perhaps his ideas will cool down the zeal of dollar bulls.

Experts at Standard Chartered reckon that some factors could pose risks for gold until the end of summer and in the autumn 2020. These risks are invention of the COVID-19 vaccine, a rapid recovery of the global economy, and weak physical demand for gold.

At the same time, Standard Chartered maintains the bullish outlook for the precious metal.

"Barring further profit-taking, we think the longer-term uptrend is intact given USD weakness and the scale of stimulus and as we expect interest rates to remain low or negative. Price dips are likely to be viewed as buying opportunities as the macro backdrop remains favourable for gold," analysts state their view on gold prospects.

Most market participants still believe that gold has enough momentum to conquer such dazzling highs as $2,300 per troy ounce in the near future. Some experts are more optimistic, projecting the rally to $3,000 and $5,000 per ounce.

The material has been provided by InstaForex Company - www.instaforex.com

GBP/USD analysis for August 21. Markets downplay data from UK and US

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The wave pattern of the upward trend, which was formed on March 20, has almost fully completed its formation. A successful attempt to break through the previous high resulted in the complication of the internal structure of Z wave. At the moment, this wave looks fully completed. Thus, the price may continue to fall to the targets located at 27 and 28 levels while forming a new descending trend pattern.

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The current wave pattern shows that the uptrend and, in particular, the Z wave, can be fully completed soon, especially after the price moved away from yesterday's highs. However, in the past few months, the demand for the US currency has been extremely low. If this tendency continues, then wave 5 in c and in Z may take an even more complex and extended form.

The last few days were extremely difficult for the British pound. At first, the pound sterling dropped 200 pips. After that, it managed to win back almost all its losses. On Friday, however, it slumped again by 200 pips. It is quite difficult to explain what is happening with the pound now. At first glance, the news background may be the reason for the pound's decline. Surprisingly, the British pound was losing its value exactly when upbeat data on inflation rate was released in the UK. Besides, positive data on retail sales for July was published this morning, as well as excellent PMI figures in manufacturing and services for August. The latter has significantly exceeded market expectations. But still the pound was not in demand. Therefore, the background is not the main reason. In the US, the situation with the news background is also confusing. It is difficult to say what kind of effect the news and reports will have on the markets. Some new is simply ignored by investors. Throughout the week, it has been speculated that Democrats and Republicans had resumed their talks on the next stimulus package to assist the US economy. For some reason, this was said to be insider information. Then it was reported that the US was also conducting covert negotiations with China on a new trade deal. And again, it is difficult to say which news attracted investors' attention. The US PMI in the services and manufacturing sectors also exceeded markets' expectations. However, by the time of the release, the US dollar had already been rising for several hours. Therefore, I can say that statistics from Britain and the US were not the main factors that caused the drop in the pair.

Conclusion and recommendations:

The pound/dollar pair resumed the formation of the upward Z wave and could have completed it right there. Thus, I would recommend buying the instrument with the targets near the level of 1.3368, which corresponds to 200% Fibonacci for each MACD buy signal. At the same time I think that the entire ascending pattern is about to complete its formation or has already completed it. If this scenario is true, then opening long positons may be too risky now.

The material has been provided by InstaForex Company - www.instaforex.com