Looking at the weakening US dollar and the first capital inflows in ETFs over the past 8 days, gold is trying to return above the psychologically important $ 2000 per ounce mark, but so far the "bulls" are not able to do this. Ahead of the publication of the minutes of the July FOMC meeting, investors prefer not to force events. It is expected that the Fed will announce its desire to tolerate high inflation for as long as necessary, which could be bad news for the US currency and good for the precious metal, but much will depend on the fate of the latter COVID-19.

The impressive almost 30% rally in XAU/USD since the beginning of the year was made possible by a combination of several factors: a weak dollar, low US Treasury bond yields, and a more than 30% increase in stocks of gold-focused specialized exchange-traded funds since the beginning of January. However, rumors about the vaccine and the belief in an early victory over the coronavirus make fans of the precious metal hold their horses. Gold is sensitive to the yield of US Treasury bonds and it is sensitive to the pandemic. This is clearly seen in the dynamics of the ratio of shares in the technology sector and shares in pharmaceutical companies that develop vaccines.

Treasury bond response to the pandemic

Success in fighting the virus is crucial for both the US economy and the US dollar. It is currently losing out to the euro due to divergence in the rate of GDP recovery, however, the situation may change due to the second wave of COVID-19 in Europe or due to other factors.

I do not think that the resumption of the trade war will help the "American", as it was in 2018-2019. Donald Trump canceled talks between Washington and Beijing on August 15, saying that he did not want to talk to China, which could prevent the spread of the pandemic. In my opinion, the escalation of the conflict will increase the risks of sales of the dollar in the process of diversification of reserves by central banks in favor of the euro and other G10 currencies. Gold can benefit from this, but the White House is unlikely to want to revive the story of import duties ahead of the elections.

As for inflation and the weakening of the world's main monetary units due to the colossal monetary stimulus, financial markets have already passed this in 2009-2011, which led first to the growth of the precious metal to record highs of $ 1921 per ounce, and then to the formation of a "bear" market. I don't rule out a repeat of history. Yes, consumer prices are gradually recovering their lost positions, however, it is not a fact that they will significantly exceed the Fed's 2% target. In the end, high inflation in a weak economy is very rare for developed countries.

Thus, the more positive news about COVID-19, the higher the chances of growth in US Treasury bond yields and gold correction. In my opinion, the precious metal is ready to enter the medium-term consolidation in the range of $ 1850-2050, while the rebound from the resistance at $ 2015 and $ 2050, as well as the fall below the support at $ 1970 and $ 1945 per ounce makes sense to use for sales.

Gold, the daily chart