04.10.201900:45 Forex Analysis & Reviews: The battle of the giants: gold versus the dollar

In the global financial market, as concerns widen about the global economic slowdown, the degree of anxiety about the prospects for the US dollar and gold is increasing. The confrontation of the two largest defensive assets could "undermine" the global economy, analysts say.

The attitude towards safe haven assets is currently being reviewed. For example, Commerzbank analysts do not classify the US currency as such, but offer to sell it. The attitude towards the yellow metal is also becoming ambiguous, although the status of a reliable means of saving capital still remains with it.

The "boost" to the current gold rally has been the recent strengthening of the US dollar. The yellow metal interrupted the price flight that began this summer. Since the end of June 2019, the value of the precious metal has increased by more than 4%, analysts emphasize. The price rally of gold took place in the context of lower rates by world regulators and against the background of the trade conflict between the US and China.

At the moment, the yellow metal is trading in the range of $1,503– $1,504 per ounce. Analysts predicted a downward trend for the precious metal, but it does not give up and holds on to its gains. The completion of correction is observed in the XAU/USD pair. Here, analysts recorded a wave of growth to around 1500. Now the pair is trading in the consolidation range near the levels of 1498-1499. In the event of a breakdown of this bar, we should expect a fall to 1488, analysts said.

Despite the suspension of the rally and some downward trend, the yellow metal remains stable and is still in the spotlight of investors. They, like analysts at the Canadian bank TDS, are counting on higher gold prices. The financial institution claims high chances of the precious metal to grow to $1,600 per ounce. This is facilitated by lower interest rates by the US Federal Reserve. Analysts consider this step to be one of the main factors supporting gold. If another reduction in rates does not occur in October, the precious metal will receive support from the weakening of the stock market.

The yellow metal has always been an antagonist for the US currency, analysts emphasize. A stronger dollar tends to weaken gold, and vice versa. In this confrontation between the giants of the world market, everyone seeks to strengthen their own positions, having won their share of the financial "pie", analysts summarize.