Despite the fact that the sky above the gold is overcast, the fact that the rays of the sun are already beginning to break through them, XAU/USD bulls are still hopeful. Yes, US stocks are rising in response to good news from the US-China negotiating table and often ignore the negative, indicating a consistently high global risk appetite. Yes, the dollar feels confident ahead of the publication of the minutes of the October FOMC meeting. Yes, the yield on 10-year Treasury bonds still wanders around the psychologically important mark of 2%. Nevertheless, gold may have a new trump card in 2020, and the old ones should not be discounted.

One of the main drivers of the XAU/USD rally in August 2018 and September 2019 was the falling rates of the global debt market. The volume of bonds traded with negative yields approached a whopping $17 trillion. Only de-escalation of the US-China trade conflict and a portion of strong macroeconomic statistics for the United States offset the situation and launched a wave of correction for precious metals. Nevertheless, bond prices depend not only on the risk appetite of investors, but also on the balance sheet. According to studies by Oxford Economics, over the next five years, the volume of debt issuance will increase by $1.7 trillion. Of these, $1.2 trillion will come from the United States. Demand is estimated to be higher by an average of $400 million, and the deficit will push prices up, and yields down, which is very good news for gold.

Debt issuance dynamics

TD Securities predicts that in 2020 financial markets will face increased volatility due to increased US political risks. Donald Trump may not be re-elected to the presidency of the United States, and an increase in the likelihood of such an outcome on the eve of the election will lead to a correction in stock indices and also to strengthen the position of gold. By the way, large-scale sales of US stocks can start as early as 2019, if Washington and Beijing do not sign a trade agreement. The owner of the White House for the second time in the last few days threatened China with a massive increase in tariffs if Xi Jinping refuses to sign the agreement.

Thanks to a pause in the process of the Fed's preventive reduction, the federal funds rate received trumps from the US dollar. Nevertheless, as early as 2020, the situation could radically change. The cessation of the trade war will be a good thing to those economies that have suffered more from it. First of all, we are talking about Germany and the eurozone. Restoring the GDP of the currency bloc will force investors to actively buy the euro, which will lead to a correction in the USD index and will lend a helping hand to the bulls on XAU/USD.

Technically, the future fate of gold will depend on the assault on resistance at $1,475 an ounce. If the bulls manage to return quotes within the previous consolidation range of $1475- $1515, the risks of an upward trend recovery will increase. On the contrary, the rebound will create the prerequisites for the development of correction in the direction of $1435-1440.