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James Hyerczyk
Gold, Silver, Platinum, Palladium

Gold futures are trading higher on Tuesday on the back of an announcement of new stimulus measures by the European Union. Before the announcement was made, the headlines said that gold was up because of safe-haven demand due to coronavirus fears, but we know that is not true. I don’t think we can have stocks rallying because of a potential COVID-19 vaccine and gold rallying because of an escalation of cases. Something has to give.

At 09:02 GMT, August Comex gold is trading $1825.60, up $8.20 or +0.45%. We’re rolling over to the December futures contract on Wednesday. The volume is too light in the October contract.

In my opinion, the potential vaccine news is off-setting the rise in COVID-19 cases, leaving investors to deal with the new stimulus from Europe and the possibility of additional fiscal stimulus from the United States government.

I may be wrong in my assessment, but it makes the most sense to me. Furthermore, I think it makes more sense to gold investors because new stimulus is more tangible to deal with than a virus that seems to be causing more confusion every day.

Additionally, professional investors know that gold tends to benefit from widespread stimulus measures from central banks and governments because it is widely viewed as a hedge against inflation and currency debasement.

Professional investors tend to react more to situations that deal with actual money. Buying gold because of a virus makes as much sense to me as buying gold because of global warming. The reasons just don’t connect with me, but I guess they do make a better headline and provide an easy narrative for lazy analysts who don’t want to find concrete reasons to buy gold. Don’t trust those guys.

Daily Forecast

Comex gold futures are getting a boost from the news that European Union leaders sealed a 750 billion Euro ($857 billion) post-pandemic stimulus plan after a marathon five-day meeting.

Now that the news is out there, be careful chasing prices higher. However, since U.S. policymakers are now expected to soon follow-up with their own stimulus measure, you may not get hurt too much overpaying for gold, but the better play is to get in on a dip.

Ideally, we’d like to see some profit-taking with the release of the EU news. This could drive prices back into support. But we may not get it. Nonetheless, you don’t want to get caught buying gold on a price spike. That’s the brokers’ job, to get their clients in at the short-term top.

Be patient, the U.S. will be coming along shortly with new money. Watch the price action and read the order flow to maximize your entries.

For a look at all of today’s economic events, check out our economic calendar.

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