Gold price forecast 1 June 2021 | XAUUSD Fundamental analysis

2021-06-01 2021-06-01
Gold is ready to continue a rally. Forecast since 01.06.2021

Dmitri Demidenko

Recently, hedge funds removed most of the 23 major commodities, believing the time for speculation was over. Gold is an exception and ready to continue the rally. Let’s discuss the Forex perspective and put together a gold trading plan

Fundamental gold forecast for week

May was the best month for gold since July last year for a reason. When inflation rises rapidly and the Fed reacts in no way, investors can only buy gold ETF products and add to speculative longings. Weak US dollar, stabilization of treasury yields and decline in the number of bitcoin investors contributed to 7% XAUUSD rally in May.

The saying that the older generation considers gold as a protection against inflation, while for the young it is a cryptocurrency, looks beautiful, but in fact it is just a legend. What kind of protection against inflationary risks can we talk about if BTCUSD prices fall by 40% from the levels of record highs, largely due to Elon Musk’s comments? Not surprisingly, doubts are growing among investors, and they are handing over money to gold ETFs. The money itself, a significant portion of which was received due to the generosity of the Fed and which drives prices in financial markets as a speculative factor.

Dynamics of capital flows in gold ETFs

Source: Bloomberg.

Interestingly, hedge funds have recently been actively cutting net longings to 20 of the 23 main commodities, as prices for them are expected to be determined not by speculation, but by the proportion of supply and demand. Gold is among the exceptions. XAU network lengths reached a 20-week high.

Dynamics and structure of commodity prices

Source: Bloomberg.

In my opinion, the speculative factor, or in other words, the flows of cheap liquidity from the Fed and other central banks, is important. Regulators will fully support the global economic recovery. This is a sign that the goods supercycle is not over yet. The higher commodity prices rise, the more likely inflation will not be temporary, the more reason to buy XAUUSD.

On the influence of supply and demand, gold also outperforms its main competitors. I have already written about the positive dynamics of ETF stocks. But the fact that China’s net gold imports through Hong Kong in April reached 52.8 tonnes, the highest since June 2018, also says a lot. Interest in physical gold is growing, which is a sure sign that all is well in terms of prices.

Weekly gold business plan

Although the precious metal quickly reached the first of the two previously set targets at $ 1905, it will be more difficult to reach the $ 1955 mark. XAUUSD bulls fear that a strong report on U.S. jobs will force the Fed to discuss a QE decline, which will strengthen the dollar and increase Treasury yields. In this situation, gold can enter a correction that must be used to insert longs. In contrast, a weak jobs report is a reason for the Fed to remain passive for a very long time, which will allow gold to continue its accumulation.