Global equity markets fell further out of favour while gold rallied after the publication of today’s US jobless claims data which showed a worse-than-expected headline figure of 2.98 million earlier. Sentiment towards risk turned further negative by the increasingly hostile rhetoric from the US towards China, with Trump saying he is “very disappointed” with China and that he doesn’t want to talk to Xi. The latest developments add to the growing list of other bearish factors we discussed earlier The net result is equities have extended their declines, underpinning safe havens gold and yen. Gold continues to look fundamentally favourable because of global central banks’ desire to depress long-term interest rates; haven flows amid worrying economic times, and some concerns over inflation.
The yellow metal has got an additional boost from momentum buying after it broke out of THIS consolidation pattern:
If the breakout can sustain itself, gold could head to a new 2020 high very soon, before potentially extending its advance towards the 127.2% Fib extension level shown on the chart. However, if this turns out to be a false breakout, then in this case we could see some aggressive selling – though this scenario looks unlikely now.