Encouraged by the example of palladium, which is not tire of rewriting historical highs, and the gloomy prospects of the world economy, gold easily crossed the psychologically important mark of $1,600 per ounce. The precious metal is not confused by the confident pace of US stock indices or the growth of the dollar to the area of a 4-month high against the main world currencies. Fears of a global recession and the belief that leading central banks will maintain ultra-loose monetary policy keep demand for safe-haven assets at an elevated level.

Strong positions of gold on the physical market provide support for the "bulls" on XAU/USD. Stocks of the largest specialized fund SPDR Gold Shares reached 929.8 tons - the highest since November 2016. Capital inflows of 11 Indian ETFs in January amounted to 62 billion rupees ($870 million), which is 31% more than in January 2019.

Dynamics of capital inflows to Indian gold ETFs

If you look at the external background, the recovery of the upward trend for the precious metal looks strange. Historical highs for the S&P 500 and a strong dollar indicate the strong position of the US economy and high global risk appetite. However, the rest of the world doesn't look as good as the United States because of the coronavirus. The Chinese economy risks slowing to 4-4. 5% in the first quarter and dragging Europe and other continents to the bottom.

At the same time, the revaluation of the dollar complicates the Fed's task of achieving the 2% target for the personal consumption expenditure index. In order to stimulate inflation, the Fed may choose to resume the cycle of preventive rate cuts, which should be considered a "bullish" factor for XAU/USD.

If ETF products are in high demand and gold is growing against an unfavorable background, can you imagine how it will spread its wings if external conditions improve? The deterioration of macroeconomic statistics for the United States will increase the likelihood of a weakening of the Fed's monetary policy and correction of US stock indexes. The precious metal will be able to benefit from these events, so it is not necessary to talk about the limited potential of the XAU/USD rally.

The key events of the economic calendar for gold can be considered the publication of the minutes of the January meetings of the Federal Reserve and the ECB and the release of data on business activity in Germany and the eurozone for February. Investors do not expect anything new from the FOMC and the Governing Council. The Fed is likely to praise itself for three acts of monetary easing in 2019, and the European Central Bank will prefer to take time to assess the impact of the coronavirus on the eurozone. Nevertheless, the protocols are a reason for fixing profits on long positions for the US dollar, which should lend a helping hand to the "bulls" for XAU/USD.

Technically, the inability of the bears to implement the 1-2-3 reversal pattern for the precious metal indicates their weakness. A break in resistance near point 3 opens the way for buyers to go north in the direction of the target by 200% using the AB=CD model. It corresponds to the mark of $1,675 per ounce.

Gold, the daily chart