Gold reaches four month low on vaccine news

Gold’s price headed lower for the second consecutive week closing on the 20th of November. The downward trend was extended into Monday’s session when the precious metal performed its second largest daily drop for the current month. Is this a sign that Gold traders are giving up long positions? Is this Gold’s new trend? These and other matters currently driving Gold’s price will be considered in this report.

First it is evident from yesterday’s session that some Gold traders had a sudden change of perspective that may have triggered the very notable selloff in the US session. This happening can be attributed to different occurrences within the financial market, at the same time. First, investors could be moving money in the stock markets which are prone to seasonal reactions. Especially this week, the Thanksgiving holiday precedes the Black Friday and the Cyber Monday which are considered some very active shopping days from a consumers perspective. Even though, these specific events are considered temporary consumers boosts, they come at a critical point for many economies that have faced a very difficult past year. The events have the ability to support the global economy as consumer spending could increase substantially. From an investors perspective we could say that, in this case one could favour the stock markets over the precious metal as they have the potential of faster and larger returns. The events performance could also set the tone for what may follow in the actual holiday season. Furthermore, investors and traders may be looking into other instruments that are currently in demand. Cryptocurrencies like Bitcoin or XRP have also been very active in the past days, possibly stealing the attention from the Gold. Especially Bitcoin has the ability to move as fast as Gold does and has been on the rise lately, making it somewhat more attractive than Gold.

On a separate note, according to many headlines in the news, the covid-19 vaccine will start to be distributed in various states in the US, as soon as the mid or end of December. Even though the general sentiment may not support the immediate use of the vaccine, the potential results that the vaccine carry’s according to its tests, could be considered a relief for global health and consequently for the economy. The vaccine could support the economy in different ways. Individuals may feel safer to travel, spend, invest which could support the global economy. Gold traders maybe seeing this as an opportunity to sell Bullion.

At the moment and during Tuesday’s European morning session we have seen a positive correlation between the USD and Gold’s price. Gold and the greenback have been weakening simultaneously for the past months yet the correlation can be challenging to identify as Gold’s movement tends to be much more abrupt and extended. Also Gold’s quality as a safe haven asset that is used to hedge financial uncertainty, makes it very unpredictable. Thus in our opinion, the positive correlation can continue temporarily.

As a closure, Gold’s price can also be sensitive to financial releases in the US. On the 25th of November we get the GDP 2nd estimate for the 3rd quarter but also the Durable good figure for October. On the same day we get the FOMC meeting minutes. Finally, political developments in the US could also move Gold’s price as new elected US president Joe Biden is currently forming the new government.

기술적 분석

XAU/USD daily chart

Please note after the latest downward movement, Gold fell to a 4 month low. Today it has tested the (S1) 1800 support level but bounced off it gaining back approximately 10 USD for the time being. If the selling persists then the (S2) 1775 hurdle could be next while the (S3) 1750 barrier could come into play in a continues bearish momentum. On the contrary, if Gold is controlled from the buy side, then our (R1) 1830 resistance level could emerge as the first test, being the lowest point reached in yesterday’s session. Higher we have also noted the (R2) 1850 line as a crucial level tested various times in November, but also back in late September. Our highest resistance line for this week’s report is the (R3) 1875 of which the price action stretched upon, in the previous week. The RSI indicator below out chart is currently running across the 30 line, a confirmation of the bearish sentiment.

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