Gold price has slowed its growth after falling from a seven-year high, but gold bulls need not worry at all, because there are still good reasons to continue to bullish gold prices.
The market is worried that the outbreak of Covid-19 will weaken global economic growth, and expects central banks around the world to ease monetary policy, thus investors seeking safe havens, resulting in the recent surge in gold prices.
At the same time, the total holdings of gold ETFs are at an all-time high, and fund managers' bullish bets on gold are close to all-time highs. By historical standards, the proportion of gold in the portfolio is still relatively small. Moreover, the danger is not over, and safe-haven funds may also push gold price up again.
Elena Mazneva and Justina Vasquez and others have listed 4 reasons why gold may continue to rise:
1. Demand for gold assets remains strong. Global gold ETFs currently hold a record total of 3,016 tones. So far, the inflow of gold ETFs in February has exceeded the inflow level of January.
2. The threat of a recession still exists. The epidemic in Europe, Japan and South Korea, the United States and the Middle East is still spreading. If the Covid-19 outbreak evolves into a pandemic, then the safe-haven funds will push gold price further. The Oxford Economics estimates that in this case, global GDP will lose $ 1.1 trillion, and the US and Eurozone economies will fall into recession in the first half of 2020.
3. The price of gold has not yet been overvalued. Although the current price of gold over $ 1600 per ounce compared to copper or oil seems quite expensive, the gold-oil ratio and gold-copper ratio are still lower than the highest levels in history, and are still rising, showing no sign of decline. In other words, the upward trend of gold prices has not been reversed.
4. Overbought technical indicators do not prevent continued bullishness. But nothing is absolute. If you look closely at the situation in the past few years, you will find that RSI is not a reliable indicator of the price of gold. On several occasions, gold price continued to rise after the indicator was overbought, and remained high even after the RSI broke through the 85 mark.
Let’s see. #Goldboom##gold##TradeNotes##StockMarketIsDownBig#
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