What's gold's next move?

What's gold's next move?

A near term bear case

The general consensus at the moment is for gold upside in the short and medium term. So, it was with interest that I came across a piece on Bloomberg's Market Live Blog making a case for gold falls in the near term. The logic was as follows:

  • Central bank stimulus is priced in and the reflation trade is now faltering.
  • The financial system is not collapsing, yet gold bullishness is based on the view that central bank liquidity will devalue fiat currencies and lead to inflation combined with safe haven demand.
  • Expecting correction in gold over the coming weeks

A bull case

On the same blog I also came across a piece arguing for more gold upside. Their logic was as follows:

  • Rising COVID-19 cases in the US will increase the economic damage.
  • The above point increases the odds for further losses in shares and more Fed stimulus. Both should aid gold upside.
  • Fed have made it clear they are willing to increase stimulus with Fed Vice Chairman Richard Clarida saying the Fed is prepared to take additional steps.

So, there we have two opposing views on gold. The picture for copper I posted yesterday looks clear as eventually COVID-19 should fade away and the worst seems behind us rather than ahead of us for now. So, what is your take on gold? Will we see more upside to come in the next few weeks or is a correction in gold coming? If gold does correct how far down do you see it falling? $1680 is obvious near term support and bulls would be expected to reload at that point in the current climate. It was telling that the article making a case for near term gold bears was not making a case for general medium term gold bearishness. The bullish picture remans in place.