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Gold inches down as vaccine rollout counters U.S. stimulus hopes

 

·         Gold prices eased on Monday as the rollout of a Covid-19 vaccine lifted riskier assets, overshadowing expectations of more U.S. fiscal and monetary stimulus.

 

·         Spot gold fell 0.2% to $1,836.08 per ounce by 0303 GMT, while U.S. gold futures eased 0.2% to $1,839.90.

 

·         “The euphoria around a Covid-19 vaccine will likely overshadow further easing from the Federal Reserve and a fiscal relief package in the near term,” said Howie Lee, an economist at OCBC Bank.

 

·         “But gold could rally in 2021 when the vaccine optimism dies down and investors’ focus returns to rising inflation expectations due to the large swathe of monetary and fiscal stimulus the U.S. economy still requires.”

 

·         The first shipments of Pfizer Inc and BioNTech SE’s approved coronavirus vaccine in the United States began on Sunday, raising hopes for a faster economic recovery and lifting Asian equities.

 

·         But gold’s losses were limited by hopes of further U.S. fiscal stimulus, with Reuters reporting that a $908 billion relief plan will be split in two in an effort to win approval and could be introduced as early as Monday.

 

·         A leading Democrat lawmaker also suggested his party might be willing to reach a compromise on the relief package.

 

·         The focus now turns to the U.S Federal Reserve’s two-day policy meeting starting on Tuesday, with investors betting on increased purchases of longer-dated Treasuries to contain a rise in yields, pulling down the dollar.

 

·         Gold, considered a hedge against inflation and currency debasement, has gained 21% so far this year on the back of near-zero interest rates and unprecedented global stimulus.

 

·         Speculators raised their bullish positions in COMEX gold and silver contracts in the week to Dec. 8, the U.S. Commodity Futures Trading Commission (CFTC) said on Friday.

 

 

·         Gold Price News and Forecast: XAU/USD’s 4H chart signals caution amid stimulus hopes

Gold (XAU/USD) is currently trading largely unchanged on the day near $1,836 per ounce, having put in a high of $1,841 early Monday. The long upper wick attached to today's candle and the previous week's candle indicates the bounce from the Nov. 30 low of $1,764 has run out of steam.

The metal could drop to Friday's low of $1,824, under which the focus would shift to $1,764. Supporting the bearish case is the below-50 reading on the 14-day Relative Strength Index.

 

·         Gold Forecast: Market Continues to Support 200-Day EMA

 The gold market initially fell during the trading session on Friday to reach down towards the 200-day EMA yet again. This is an area that has been supportive more than once, and the fact that we have turned around to form a hammer suggests that we could go higher. After all, the United States is discussing stimulus, which should show strength in this market. After a stimulus bill is passed, one would think that the greenback will lose strength and, as the gold markets are priced in those greenbacks, it is very likely that we will see the dollar push gold higher for of this reason alone.

Furthermore, central banks around the world are all doing quantitative easing and loosening to bring down the value of fiat currency, as we are in a massive “race to the bottom.” It is therefore likely that the gold market will be favored going forward, and even though we have pulled back a bit when you look at the longer-term trend, we have only pulled back to the 38.2% Fibonacci retracement level.

In the short term, the 50-day EMA is near the $1875 level, and if we can break above there it is likely that we will go looking towards the $1900 level. After that, we could be looking at the $1950 level. Every time we pull back in the gold market, we find people willing to jump in and pick up a bit of gold in order to build a bigger position. Furthermore, the candlestick does suggest that there is support underneath, and it is worth noting that the last three days in a row have seen buyers at the exact same area. That along with the 200-day EMA sitting just underneath does make an argument for more supportive action. We will eventually get to the $2100 level again, but it will take some time to get there. Shorting gold is something that I have no interest in doing anytime soon, as even though we have pulled back a bit over the last couple of months, we are still very much in an uptrend.

 

·         Silver rose 0.2% to $23.97 an ounce, while platinum gained 0.8% to $1,017.34 and palladium gained 0.4% to $2,328.74.

 

 

Reference: CNBC, FXStreet, DailyForex