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Gold gains as weaker dollar offsets U.S stimulus doubts

 

·         Gold prices ticked higher on Wednesday as weakness in the dollar offset worries about a U.S. stimulus deal after President Donald Trump threatened not to sign the pandemic relief bill.

 

·         Spot gold rose 0.3% to $1,865.01 per ounce by 0333 GMT, while U.S. gold futures were steady at $1,869.80.

 

·         The U.S. dollar edged down 0.1% against a basket of currencies, increasing gold’s appeal among holders of other units.

 

·         Since the market has priced in a lot of pandemic-related uncertainty and the U.S. fiscal stimulus deal, gold will likely tread water in the coming weeks and any potential upside will come from new unknown uncertainties, said Michael Langford, director at corporate advisory AirGuide.

 

·         “The next move for fund managers is probably to de-risk ... I think we’ll see greater flows towards gold exchange-traded funds as they take some risk off the table,” Langford said.

 

·         Raising concerns over a global economic recovery, a fast-spreading new coronavirus strain found in Britain has forced several countries around the world to shut their borders to the United Kingdom and drugmakers to scramble to test their Covid-19 vaccines against it.

 

·         Gold has climbed 22.9% so far this year on the back of large stimulus measures to aid pandemic-ravaged economies, as it is seen as a hedge against inflation likely to result from such stimulus and benefits from low-interest rates that reduce its opportunity cost.

 

·         Gold will recover its historical relationship with real yields, and real yields will likely continue to fall so there is no reason to think gold cannot make another push for $2,000 next year if this trend prevails, said IG Market analyst Kyle Rodda.

·         India’s Gold Jewellery Exports Witnessed Notable Decline

The trade data published by the Gem and Jewellery Export Promotion Council (GJEPC) of India for the month of November this year suggests significant decline in the value of gold jewellery exports by the country. On the other hand, the country’s silver jewellery exports witnessed notable surge during the month.

The country exported $523.89 million (INR 3,888.01 Crores) worth of gold jewellery in November 2020. In rupee terms, the exports stood lower by approximately 50%. The decline in dollar terms was almost 52%. India’s gold jewellery exports had totalled $1,084.18 million (INR 7,750.23 Crores) in November last year.

The cumulative exports during the first eight months from April ’20 to November 2020 of the current fiscal year totalled USD 2,472.62 million, which is down by nearly 71% when matched with the exports of USD 8,400.57 million during the corresponding eight-month period last fiscal.

Meantime, the silver jewellery exports increased significantly during the month of November this year. The monthly exports surged higher by nearly 50% from USD 128.91 million in November last year to USD 193.28 million in November 2020. Also, the year-to-date exports this fiscal were up by almost 61% when compared with the previous fiscal.

·         Gold Price Analysis: XAU/USD sellers remain hopeful below $1880 after Trump’s stimulus blow – Confluence Detector

 

Gold (XAU/USD) is nursing losses after three consecutive days of declines, although remains in a familiar range above $1850. The renewed concerns about a $900 billion COVID-19 relief package could likely keep gold on the back foot. US President Donald Trump asked for an amendment to the pandemic relief package.

 

However, broad-based US dollar retreat cushions the downside in gold. Brexit deal optimism and disappointing US Consumer Confidence data weigh negatively on the greenback. Pre-Christmas thin trading conditions will continue to play out ahead of the US economic releases.

 

Gold Price Chart: Key resistances and supports

The Technical Confluences Indicator shows that the XAU/USD pair is struggling to overcome a dense cluster of resistance levels stacked up around the $1867-69 region.

 

That area is the confluence of the Fibonacci 38.2% one-week, SMA5 four-hour and the previous high four-hour.

 

A firm break above the latter could expose a minor cap at $1874, which is the convergence of the SMA5 one-day and Fibonacci 61.8% one-day.

 

Up next, the bulls are likely to challenge the critical barrier at $1880, the intersection of the Pivot Point one-day R1, Fibonacci 23.6% one-week and Bollinger Band four-hour Middle.

 

To the downside, minor support awaits at $1861, where the SMA200 one-hour coincides with SMA50 four-hour and the previous low four-hour.

 

The SMA10 one-day at $1856 is the next relevant downside target, below which the Pivot Point one-day S1 of $1852 could be probed.

 

The bears need a break below the $1850 barrier to reviving the bearish bias. The Fibonacci 61.8% one-week is aligned at that level.