Gold dropped significantly yesterday, while analysts predicted $1 800. Were they wrong?
Reasons of gold rally
XAU/USD set a strong upward trend. It reached the 8-year high. Most economists predicted that the gold price would continue rising up to $1 800. Indeed, gold tends to increase amid the market uncertainty. And there are a lot of reasons to be hesitant now:
- the fresh resurgence of new coronavirus cases in the USA,
- US-China tensions,
- high unemployment,
- unsustainable economic recovery.
Investors usually pour money to safe-haven assets such as gold, USD and JPY in such dark times. However, the US dollar started to lose its safe-haven title. Its global dominance has waned as the USA is suffering from the virus outbreak. That’s why gold turned to the number one “emergency” asset. Nevertheless, successful Covid-19 vaccine tests from Pfizer and BioNtech improved the market sentiment. Therefore, yesterday gold bears became stronger and the price dropped. Traders started doubting whether it’s time to sell gold. Most analysts reassured that it’s not the time yet. According to Peter Cardillo, chief market economist at Spartan Capital Securities: “gold is continuing to rise reaching new historic levels setting the stage for $2 000 gold sometime this year”.