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Gold price loses chance to set new record

US Treasury candidate Jannette Yellen has called for big action now to help the world’s largest economy weather the recession caused by the pandemic. This tone of comment, while expected by most market participants, had a positive effect on the markets on Wednesday morning. Heavy spending by the US government and other developed countries triggered a rally in gold and equity markets earlier in 2020. It should be expected that maintaining such a rate will allow the markets to continue to stay within the framework of previous trends. Note that by the end of the year, gold has clearly lost its growth momentum, temporarily falling below the 200-day average at the end of November and circling around this line for the last two weeks. This line has consistently served as a support level for an uptrend over the past two-plus years. The report on inflows to gold ETFs published the other day marked record volumes in 2020, beating the indicators of 2009. It is worth considering that some investors are realizing their interest in insuring capital against inflation in cryptocurrencies, and some are content with buying growth stocks, counting on the powerful positions of these companies in the coming years. The gold price is going through tough times, stuck in a downside trend since August. Market optimism recovery this week has brought the price per ounce back above $ 1,850, and the 200-day moving average looks like a support level again, but cannot break away from it. 200-day average. If the price falls below these levels, it will become a strong bearish signal, which is called the “cross of death.” The situation on the charts of gold quoted in euros is even more alarming. There, the chart dipped below the 200-day average at the end of November, at the same time slipping under the correction line by 23.6% from the growth of the previous two years. In early January, the same 200-day moving average was already acting as resistance. The deeper retracement pattern suggests a dip towards 1470, a 38.2% Fibonacci level. Fundamentally, a huge incentive for the population should fuel inflation and keep gold interest alive. This trend has been the focus of the markets since the World Financial Crisis. However, later it turned out that incentives and QE did not accelerate inflation, causing a wave of gold sales from 2011 to 2015. We are still confident that this time incentives are just a serious pro-inflationary factor, since households are not as burdened with debt as in 2008/09, while government support measures are focused on direct payments to the population and the unemployed, rather than bailing out companies. ______________ Alexander Kuptsikevich, Lead Analyst, FxPro

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