In a world that will look better in the future than at present, there is no need to keep as many safe-haven assets in investment portfolios as now. This was proved by the events of 2020-2021 when gold collapsed from record highs above $2,000 per ounce to more than $300 in early August. Then the spread of the delta strain across the planet again made investors doubt that tomorrow will be better than yesterday. It would seem that the precious metal returned to its former popularity, but the victory of the "bulls" on XAU/USD turned out to be pyrrhic.
The full acceptance of the Pfizer/BioNTech vaccine by US regulators, the rapid suppression of the COVID-19 outbreak in China, the hopes for new fiscal stimulus from Joe Biden, and the belief that the Fed will normalize monetary policy at a turtle's pace have heightened investor optimism. The S&P 500 saw another 51st record close since the beginning of the year, and the yield on the 5-year US Treasury bonds, which are sensitive to changes in monetary policy, went up. Shares are actively bought, bonds are sold no less actively. Isn't it a sign of a growing global risk appetite? In such an environment, interest-bearing gold often feels uncomfortable.
Dynamics of the yield differential for US Treasury bonds
The precious metal is not particularly helped by the fall of the US dollar ahead of Jerome Powell's speech in Jackson Hole. Investors fear that the Fed chairman will link the adjustments in monetary policy to the delta strain, as Dallas Fed Chairman Robert Kaplan did a few days ago. In addition, the likelihood of the announcement of the start of the process of curtailing the American quantitative easing program is smoothly shifting to November, and the actual start of the reduction in bond purchases by $120 billion per month is at the beginning of 2022.
In my opinion, only a strong US employment report for August can dot the i's. It is highly doubtful that Jerome Powell has taken the lead and announced the tapering of QE in Jackson Hole. The strengthening of the US dollar should be expected a little later, but for now, UBS Global Wealth Management recommends selling gold at attractive prices and predicts their decline to $1,600 per ounce. JP Morgan notes that the bearish trend remains in effect, and Goldman Sachs, which still does not give up hope for XAU/USD to rise to $2,000, says that, in the current situation, the trend is not our friend.
Thus, a rather paradoxical situation has developed in the global financial system: the number of infected with COVID-19 is growing, but the markets are signaling that everything may change in the near future. For me personally, current events remind me of the end of last year, when the belief in victory over the pandemic with the help of vaccines pushed up the quotes of American stocks and made XAU/USD fall.
Technically, gold's failure to take the $1,805 fair value per ounce by storm, identified through the market profile, is a sign of its weakness. The fall of the precious metal below the support at $1,775, where the important pivot point and moving averages are located, may serve as a signal to open short positions.
Gold, Daily chart
