Will Gold Prices Reach $2000?

Okay, very good morning to you. It's Anthony Cheung here from Amplified Trading. It is Wednesday the 22nd of July. First of all, don't forget to like and subscribe to our YouTube channel for fresh daily content from me and other members of the team. But having a look then at what have we got in store for the session ahead And first of all, before I get into some of these news headlines, let's just have a look at the overall charts and what's happening this morning. And, you know, really big day in the markets last day or so. Some real key longstanding technical breaches that we've had in the oil market, extensions in the gold and silver market, the euro also breaking out on the back of the European Recovery Fund agreement that we saw yesterday. And equities, NASDAQ record high. Obviously it pulled back a little bit yesterday. But still somewhat elevated in a very close proximity to those all-time highs, still within touching distance. So a lot of positives to talk about, but also a few negatives fundamentally for sterling. A few things I want to cover. And also, um, when everyone starts to get ultra bullish, does start to make me feel a little bit apprehensive and slightly nervous. Um, always normally the tipping point is when everyone becomes a perma bull is when the markets tend to then see a bit of a correction. So there's definitely a few things on the COVID front that I want to just make you guys aware and keep in the back of your mind, that this is, um, yes, not a focal point, uh, definitively driving price action right now amid all the positivity. But look, it definitely does warrant watching, overlaid as well with a few of these things about the next relief bill that needs to be passed in America to offset the expiration of some of those programs. Definitely is a few risks on the table. Then we've got corporate earnings— Tesla and Microsoft, two of the biggest ones. We're going to have a talk about those as well. So looking at the charts this morning, a quick run-through of a few of them, and starting off with the euro as we did yesterday. And yeah, really solid breakout of what was containing some of the upside price activity throughout the last real two days. And yesterday just exploding through that in the afternoon on the confirmation then of a lot of what we were seeing. From the post-recovery fund agreement. And on the weekly candlesticks, to put in again the context of that bigger picture, you know, not just confirmation now of the trendline break and the previous area of resistance around 1.1380 to 1.1424 area in the euro future, we now smash through those early year-to-date highs and we're now trading the highest level here in the euro since going all the way back really till later part of 2018, targeting now up at around the 1.16 handle. So Alex, I know, on the team, it's always been very bullish in this setup. He's actually looking for a much more progressive move all the way up toward that high that we were trading in the summer really of 2018, which would be in excess of 1.18. And a couple things definitely to talk about here while I'm on the euro that, that might validate what he's saying. And a few of these things are— I'm looking at the first headlines— a threat to the dollar's global supremacy revived by the EU stimulus deal. Now, one of the things here was talking about this recovery fund that Europe has put into place and how it will facilitate diversification out of the US dollar by offering liquid, high-rating euro-denominated debt. So remember now, this is a collective united kind of European front And so, you know, higher quality debt offered on a euro-denominated level is going to be a major competition then for US debt in that respect. And if the cash starts flying into Europe, not into the US, that's going to be to the benefit of the euro currency, to the disbenefit of the greenback. Now, one of the things that some people have looked at is these ongoing hedge fund manager surveys. Bank of America is probably the most notable one that comes out on a regular basis. and their latest fund manager survey found that investors raised their allocation to eurozone equities by about 9 percentage points. I think I, I did address this briefly before, um, in one of my briefings last week, but it's the largest increase we've seen into a geographic region, um, for equity allocation, um, in a long time. And you can see here the outperformance ever since the initial back in mid-May, German-French proposal on the EU recovery fund was tabled, the European equity market has starkly outperformed pretty much everything from the Asia-Pac region to the S&P 500, which albeit is up a sharp amount, it's just that Europe has outperformed it. It's just done an awesome job ever since reacting to this significant stimulus. And part of the discussion I was having with the guys yesterday is, look, put this into a bit of context. European equity outperformance, you've got euro currency outperformance, and there's a lot of things here at play from a European perspective. Um, if you think about, say, €750 billion worth of now, uh, of what we have in this recovery fund, of €390 billion of that is in grants, uh, not loans. So a significant amount is not expected to be paid back. You've then got the ECB with their pandemic emergency purchase program, the PEPP, Teltros, it's got a total envelope size of €1.35 trillion. You've then got the asset purchase program at the ECB, uh, that will continue at a monthly pace of €20 billion per month of bond buying, together with purchases under the additional €120 billion additional temporary envelope in QE from ECB to the end of the year. You've then got the targeted third Teltros coming out of the ECB for bank funding. Then you've got all the national stimulus that all these European countries are doing on a singular country-to-country basis. So there's a lot going on here to assure the economic recovery of the eurozone, and they've made a lot of headway. And it's kind of the cherry on the cake was not just independently but now collectively coming together in this European agreement that they've compromised and now concluded has been such a positive force. And, you know, I, I do think that definitely there's some upside here. I would be expecting a test on this 1.16 in the euro in perhaps today, but definitely in the coming days and weeks. And then, yeah, I think there's, there's decent argument for, for Alex's view that we're going to move up, uh, up towards the 1.18 and, and target it back up to these 1.18 highs. The other thing here is I'm going to bring into the shot is the Dixie. Now, the Dixie, obviously, for, for the same basis of the argument I was talking about, this kind of, um, competition, if you like, now from this euro for this global kind of status in terms of investors' mind. Let's not get away from the point that the dollar will remain the reserve currency given the amount of proportionate trade that it makes up on a global basis. But technically speaking, this is looking at the Dixie This is looking at the Dixie over the last 5 to 6 years, and the arrows would be indicative of a horizontal line of the 95 level in the Dixie. It bounced pretty much perfect on there, uh, on the, the kind of dollar rout that we had yesterday amid the euro strength. Now you can see here there's been some prior occasions back at the beginning of this year in the midst of the volatility with the pandemic we, we bounced off 95. We bounced off 95 as well back in 2018. It was a solid resistance level into kind of Q4 of 2017. You know, 95 is a big level for the Dixie, and we are trading right around there at the moment. So that needs close monitoring because if we break through this and the dollar starts to break down further, that's only going to accelerate that EURUSD move to the upside. So definitely I'll be watching that closely over the next coming days for sure, and to see how we, we bounce or break on those levels, or perhaps even consolidate for the time being. Um, the other thing of course has been the dollar weakness, as we've seen going from 100 really over the course of the last couple of months as the dust has settled somewhat on the market's initial panic over that flight to quality bid that the dollar received in the midst of the lockdown. But as the markets have somewhat stabilized, the dollar has continued to back off. And now overlay that with this kind of euro-competitive kind of idea that we've talked about. So fundamentally, for the moment, still remain quite bullish here in the, in the euro over the medium term. The other thing I quickly wanted to mention then as an extension of this discussion is talking about this headline here, which was Europe's $3.5 trillion now of unity rally leaves Britain far behind. And just reading through some of the headlines this morning, um, this was one of the things that I saw, um, that goes in combination really with this. So let me just read you and get you up to speed with a couple of headlines in play in the press this morning. And how I'm kind of entitling this is the euro versus the pound and with Brexit as the real kind of topical point. So Britain and the European Union will fail to sign a post-Brexit trade deal with only a few days left before the Prime Minister Boris Johnson's July deadline, according to The Telegraph newspaper. Now, this was somewhat of a self-imposed deadline. So for me, this, this part of the stories that I'm going to run through is not such a big deal. I don't think I'd be looking to just get heavy short on a short-term basis in the pound just on the back of that one singular headline. And Boris Johnson is always trying to put in these self-imposed short-term deadlines in order to kind of cultivate then progression in the talks, that there's always kind of a looming deadline. But ultimately, most people of the opinion that autumn is where the real deal-making is going to come when it comes to Brexit, in time for then that lapsing of the transition at the end of the year. Now, a few other things though. Negotiators then, they still remain deadlocked on the same issues. This is potentially one of the more worrying things, is that there's been all of this back and forth, regular teleconference, and now face-to-face meetings, and they're still stuck on the same points. These points being deadlocked on fishing rights, the deal's governance, the European Court of Justice role, and the so-called level playing field guarantees. All of those things are the same things they've been debating for many months. So the question mark is, you know, can they actually get enough compromise to deal with these things? Not only this though, this was one of the other headlines I had this morning. This was in the Financial Times, and it was talking about the British government has abandoned any hopes of a UK-US trade deal ahead of the autumn's American presidential election. Now remember You've got the presidential election happening at early November, the Brexit transition deadline, of course, where we still have a threat of a no deal. That's still a tangible outcome, albeit a lower probability. But that's then just weeks after that presidential election. Hard to see then. I mean, imagine if you had a switch in government as well at the head and Biden wins over Trump. Very difficult to see a trade deal being done in such a short period of time with an entire new president in place. So lots of pressure there as well, because you remember a lot of commentary when Brexit was first done 4 years ago was about, look, America would be first in line at the queue, doing a trade deal would be easy peasy. And here we are 4 years later coming up to a looming deadline, and basically the US have got no interest in cutting a deal at this point. You know, there's so much other political self-interest at play here in a campaign year. UK is further down the queue in the order of priority of things. So again, you've got a couple of things here that are really key. So the US and UK trade deal ahead of the presidential election is now pretty much not going to happen. British officials are blaming COVID-19. You know, COVID-19 is going to be the get-out-of-jail for most political disappointments, uh, for any ruling incumbent at the moment. It's going to be, what's COVID-19's fault? But a third round of talks will begin via online video conference on Monday between the UK and the US, but no one's expecting any further progression or conclusive breakthrough at this point in time. Thirdly, so you've got Europe, got the US, Thirdly, you've got China. And you remember recently, um, UK has done a bit of a reversal on the dealing of using the technology firm Huawei. We've also had then that knee-jerk reaction, and partly that due to the security bill change that we've had implemented in Hong Kong. And so there's a lot of pressure at the moment on the UK's relationship with China. Now don't forget, China is the second largest economy in in the world. And so, you know, having a very strong relationship is key here for the UK's competitiveness globally and also the country's wider interests. And so on three fronts here, the UK is finding some difficulties. All the meanwhile, Europe is about as united as it has been in a long time and has this phenomenal size cumulative monetary and fiscal response to the pandemic. So fundamentally, euro, pound— there's been a complete divergence between the two. And interestingly, going back to that Bank of America Fund Managers Survey, Europe, then they've raised their equity allocations by 9 percentage points. You want to know who's ranked as the most disliked country? It's the UK, of course. And this isn't just Bank of America, this resonates across a lot of big institutions at this point of time. If you think about it, do I want to invest in the UK in the next 3 to 5 years? Sure, you know, things are very depressed and ultimately things will work their way out over the long term. Would I want to invest in the UK in the next 6 to 12 months? Quite frankly, I'd rather invest somewhere else because there's just too much uncertainty and tail risk around what-if scenarios if they don't broker this free trade agreement or deal with the European Union by the end of the year. And so the UK is just out of favor, but, but out of favor with the US and also with a very fragile, rocky relationship developing with China at the moment. All of this, of course, comes at a time where the government cannot backstop the economy forever. And that time in itself is coming in the autumn for the UK as well, prior to the actual deadline. So there's a lot of things here stacking up against the government in the UK, and I just thought I'd point these, these things out. Um, a few other stories then that I just wanted to cover. I'm going to take a look at gold and silver. Let's just check out that gold chart because it is an impressive one to say the least. I mean, this is looking at the, the move that we've had in the overnight session. So generally in the Asia-Pacific session, fairly illiquid, you tend to then see these quite pronounced moves in the market. You can see 1850 was always around that level. I mean, 1848 test, got back up through it, and then 1850 purely on the basis of it being a round figure on the cent to then $1,900, um, was going to be a key area, and it just rocketed higher through that. You can see very much then a function probably of the illiquid market, fast money move, because the extremity of that wick would, would reflect that type of price activity. And now we're consolidating, but don't forget we're consolidating with another $16 gain on a day where we rallied a decent $20, $30. So looking on a monthly continuation, this is what the gold chart looks like. And there's a couple of things I just wanted to point out. For one, you know, why is gold rallying? Well, technically speaking, obviously there's been some, some key breaches of these levels we've been watching for a long time. Remember in the briefings I was delivering a month or two ago, we were talking about this kind of the close proximity around that $1,800, looking at the futures here. We'd knocked on it a couple of times, but given the geopolitical general risks that are apparent, uh, clear and present dangers around the world at the moment in various different geographic hotspots, resurgence in virus cases, slowing growth, weaker dollar, negative real interest rates in the US— all of these things are bullish factors for gold. With the technical breach then, and now we've really opened it up with some clear blue sky for a move higher. And $1,900 and a retest on all-time highs, definitely. I think that's on the cards now. $40 off there could even happen today. Um, you know, hence the— well, how gold tends to move in this type of environment, you know, because targeting here, there is no other technical level here on the upside to restrict this price now. And all things remaining equal, I can't really see too much change into those factors that have supported gold and silver prices more recently. So here, the all-time high is the next target. Now that would be up— we've got to go all the way back to 2011 when we printed at $1,920. So the first stop here, you've got $1,900, $40 away from there now, $20 above there, the all-time high. And I did see some commentary out of Citi. They've been quite bullish in recent research notes, but I thought to add a layer of context, they expect to climb to the all-time high in the next 6 to 9 months, that being to here. I think, I mean, how about the next 6 to 9 days we get there rather than months? But they also assign a 30% probability that we get to $2,000 an ounce in the next 3 to 5 months. And yeah, I mean, definitely just given the way that global assets are performing at the moment, obviously the, the all-time high will be a big marker. But if we bust the all-time high then that's really going to open the floodgates. And then yeah, 2,000 would be the next logical target. Why? Because it's a round figure and humans are fairly irrational. We just try to find confidence and faith in things that look familiar, and a round number will do the job. 2,000 would be hugely psychological, so I do think we could get there under those circumstances. All right, a few other things then. In the oil market, of course, had the APIs last night. Crude inventories rose by 7.54 million barrels last week. So a little bit of oil price just coming off that original high that we had. Oil's been another one of those where long-term levels have been breached. We've broken above that, that key area of resistance we've been watching for a while. A little push And I think now it's more a case of, for me, um, consolidation really. That level that was such a good resistance point now is such a great support point. So just because we come off a little bit in the overnight session and we might see some volatility today amongst the infantry data, that doesn't really detract from the point that for the moment I'd be looking for price to, to consolidate between these two kind of price levels of 41 and 4332 for now. Also with that 200 DMA capping on the upside with that March 2nd low to keep an eye on. So oil inventories later to keep an eye on, but we'll get into that closer toward the time of the release. A few other things then for me to wrap up on. One is the earnings perspective, what's going on here. Well, today we get Microsoft and Tesla. They're coming after market though. They're the kind of two big ones that we'll be looking for. There are other companies today pre-market. You've got the NASDAQ exchange, Biogen, Thermo Fisher, a few other names. After market though is where it's at. And of these two companies, just going to give you a bit of context around some things I'm watching. For Microsoft, continue to keep a very close eye on their intelligent cloud business. That's been the real focal point of interest for investors to look at and what has really largely determined their share price reaction in aftermarket trade. Some positives first for Microsoft: customers spending on their cloud platforms and infrastructure. Now, this idea about supporting employees as they work from home in this new COVID era should have been a net positive for the firm and continued strong growth in that particular cloud division. On the negative side, in their previous earnings report, coming just on the end of when this, this pandemic was initially just, uh, or it was an epidemic status at that point, was just kicking off in America, they said there was a slowdown in transactional licensing, particularly in small, medium-sized businesses, and a reduction on advertising on, on platforms like LinkedIn, for example. So they're the kind of pros and cons. On the Tesla side of things, obviously This is one of those which generates a lot of headline buzz given Tesla's such a kind of fad stock of the here and now. Their shares are up really not far off 300% for the year. It's just mind-blowing. They only placed second in the NASDAQ to Moderna, which is that US pharmaceutical company that's been working on that COVID-19 vaccine or therapy treatment. So they've had a phenomenal ride of late. A couple of points though I thought were quite interesting, and one I was reading in an article this morning, so let me read them to you. Now, the bottom line for Tesla will be closely watched to see whether the company manages to pull off a profit based on, on GAAP. Now, GAAP is Generally Accepted Accounting Principles. Now, the reason why this is so important is that such a result would mark the company's fourth consecutive quarter of GAAP profitability. Now that then has a very important milestone that the company has met. That means the stock is eligible for consideration in inclusion into the S&P 500. And if you think about what that means, then having entry into such a bellwether index like the S&P 500 means that, that will broaden the pool of potential investors into Tesla's stock. With buyers of index funds, ETF trackers that follow the S&P 500, gaining exposure now to the car maker shares for the first time. So yeah, it could be super interesting. I'll probably be tweeting this, so feel free to follow me when those numbers come out later tonight. I'll be quite excited to see how they, they play out, but they'll both be after market. I did put all of this information on a tweet earlier with all the numbers the metrics you need to be aware of. So check it out, check it out on my account. Final things I just wanted to cover were the COVID front, and this was a graphic I'm going to hold up whilst I go over a couple of headlines that have been spoken overnight. First of all, President Trump, the guy who would never wear a mask, now holding daily coronavirus updates. And has been wearing his mask and is encouraging others to wear his— wear their mask. He's also warned last night that the coronavirus outbreak in the US is likely to get worse. So it's kind of damage limitation here, trying to front-run what is inevitable, that numbers are getting worse. California confirmed that infections in the state have now surpassed 400,000, and for the first time since the end of May, the 29th of May, the US has suffered more than 1,000 deaths in a single day according to the COVID-19 Tracking Project, which is one of the most, um, followed in terms of those statistics. So yeah, the COVID situation certainly hasn't gone away, and there's a few other things here that I just wanted to mention. For one, this is another graphic that I thought was quite interesting of a stat that I saw. This was looking at COVID-19 hospitalizations in the US hit a new high basically today, surpassing the previous prior high in April. So hospitalizations are right back up there. Remember when people were panicking about facilities getting full, running out of spare capacity? We're right back up to those numbers, and those numbers are still anticipated to head further north at this point in time. So definitely the COVID situation, the fact that numbers are rising, and you can see here California, Florida, obviously these, these, these other regions outside of New York have taken on a different speed and trajectory to that of what we had initially on the northeast coast in the tri-state. But hospitalizations are picking up now. That in combination with, don't forget, As I've said from Monday, there's a lot of focus on Capitol Hill at the moment about striking new deals in regards to Congress and these relief plans. Senator Majority Leader Mitch McConnell told Politico yesterday that he does not expect Congress to pass the next relief bill by next week, and that's the complete opposite and in contrast to what the Treasury Secretary Steven Mnuchin has been saying. And it's very important that a lot of these things, with the amount and volume rolling off, that it gets supplemented with something. Now the key is, is there's a lot of political jousting to try and get the best deal possible depending on what side of the floor you sit and so on, and political internal struggles that are going on fighting for power. But the idea here is if that they don't get something together, which I think they will, then there's a risk that markets might get nervous then about implications that would have on the speed of the economic recovery, because a lot of people would be out of pocket. More loss of confidence, as we saw in the consumer confidence data earlier this week. More increased job losses, a domino effect, and so on. The other thing on that front that I thought was quite interesting was this: there was a lot of talk over the recent months about the, uh, the kind of incredible performance of the Citigroup Economic Surprise Index. The CSI is the yellow line here, and what I'm looking at is the QQQ. So this is looking at kind of clubbed together reflective of big technology firms in the NASDAQ, and the surprise index is actually just dropping off a little bit. So I think that's a natural course of things, is that you cannot always super exceed expectations because ultimately expectations continue to then rise to catch up pace. And then we get a tipping point, which we're kind of at the moment, where now the economic reality of these data points starts coming in, like consumer confidence, and it misses expectations because the bar has risen so aggressively high given it was so low before. And so as that comes off, that's going to be quite interesting as well. So You know, as much as there are positives in the market at the moment, in the likes of Europe narrative we talked about, you know, gold, gold is firing up. But I think gold is supported, you know, gold is the one trade that kind of wins in all scenarios here. I think that's why it's been so bullish as an asset, you know, whether things are great, the dollar weakens, or the dollar loses out on the European side as per the argument we've been discussing. That's dollar positive. The virus gets worse, well, that's gold positive. If the virus gets worse, it's gold positive. If there's geopolitical unrest, it's gold positive. So yeah, I'm not, I'm not saying jump in now. I mean, obviously the opportunities might well come if you get a good technical entry point. I do think we are in the medium term going to all-time highs, but you know, there's a lot to be said, um, for having some exposure to that asset at this point in time. But there's a balancing act here at the moment. COVID hasn't been a big deal for a little while, but I do think that that time is coming in combination with a couple of these other factors that I've discussed. Um, calendar for today, very quiet. There really is nothing of real interest happening. You've of course got the DOE happening later on this afternoon. There's nothing coming out of Europe of interest, or the UK. Canadian CPI data this afternoon, and you've got existing home sales out of the States. From the speaker side of things, you've got ECB's de Guindos, kind of second in command at the ECB, speaking at the US-EU symposium. And a couple of bond auctions as well if you are trading fixed income. You've got a gilt auction, a European longer-dated German auction, and you've got a 20-year bond auction for $17 billion coming out of the, the US. And then those aftermarket earnings, as I said, Microsoft, Tesla will be the main focal points. All right, that is it. As I said before, don't forget to subscribe to the YouTube channel. Really appreciate all your support, engagement, and comments. As always, um, you know, love helping you guys out if I can. Otherwise, have a good session ahead. And I'll see you tomorrow. Thanks very much.