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Gold Forecast for November 18-22, 2019

November 18, 2019 at 15:25 by Vladimir Vyun

Gold did not perform particularly well last week. Signs that the Federal Reserve is going to pause monetary easing and optimism for a trade deal between the United States and China hurt the precious metal. Will it be able to recover this week? This depends on several key factors.

As gold often trades in an inverse correlation to the US dollar, it will react to the same events as the greenback but in the opposite manner.

One of the most important events this week will be the release of the minutes of the Federal Open Market Committee monetary policy meeting in October. The FOMC decided to cut its benchmark interest rate at the gathering but signaled that it does not plan to lower rates further in the near future. Market participants will study the minutes in hopes to find more details about FOMC plans for monetary policy. Depending on whether the notes will be dovish or hawkish, gold may rise in the former case and fall in the latter.

There will be few important macroeconomic releases this week. But if they affect the dollar, then gold will also likely react. In particular, traders watch for PMI figures from Markit due for release on Friday.

The euro is usually inversely correlated to the dollar, the same as gold. Consequently, the shared currency in the eurozone and the precious metals are often directly correlated. That makes events in the eurozone also important to bullion to some degree. The European Central Bank will release its monetary policy minutes on Thursday. If the accounts are dovish, it will be negative for the metal. Markit will release PMI figures for the eurozone on Friday as well, and the euro’s reaction to the releases can affect gold too.

While this week’s events seem highly unpredictable, DailyFX was bullish on gold. It cited the US-China trade war as a possible supportive factor for bullion:

The US-China trade war has been one the most influential factors impacting global growth and contributing to the broad trend of world-wide disinflation. The response by central banks has been to cut interest rates as a way to stimulate economic activity and revive inflation has created an environment where anti-fiat assets – like gold – thrive. Therefore, if the report spooks markets, gold prices may edge higher.

The resulting global economic slowdown can also boost demand for gold as a safe haven:

The OECD will be publishing its global economic outlook this week, which, much like trade wars risks, may stoke volatility and push gold prices higher if it accompanies a rise in expectations of future easing measures. The IMF and numerous other institutions have repeatedly cited weakening international trade as a key source of angst among producers who are reluctant to expand their enterprises if adequate global demand is lacking.

If you have any questions and comments on gold today, use the form below to reply.

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