MTS Help Center

Gold Price Analysis: XAU/USD buyers eye $1,900 as US Pres. Trump teases ‘good news’ on covid relief bill

Gold prices waver around $1,890-88, up 0.45% intraday, during Monday’s Asian session. That said, the yellow metal jumped from last week’s close of near $1,880 to around $1,891 at the week’s start as traders initially reacted to the Brexit deal passage.

Having initially stepped back from signing the coronavirus (COVID-19) relief bill, already passed by the Congress, US President Donald Trump recently tweeted ‘good news’ on the much-awaited aid package. In the latest update, the Washington Post said Capitol Hill members are ready to “make one last attempt to avert a shutdown on Monday.”

Other than the stimulus update, comments from AstraZeneca CEO Pascal Soriot that their covid vaccine is effective against new strain joins Brexit deal passage to favor the risks.

That said, S&P 500 Futures pierce the 3,700 mark to print a 0.23% intraday gain versus the mild losses before a few minutes.

Looking forward, off in major markets and the year-end holiday season may challenge the gold price momentum. However, positive news on the US relief bill can favor the bulls. It should, however, be noted that the American government will be shut down if policymakers fail to approve the bills before Tuesday ends. The same can weigh risks and probe gold buyers afterward.

Technical analysis

An ascending trend line from November 30, at $1,879 now, restricts the short-term downside of the metal. Meanwhile, gold bulls can keep attacking $1,900 while targeting a five-week-old resistance line, at $1,928.50 now.

· Gold miners’ production set to rebound in 2021

Overall the top 20 gold miners are projected to lose ~5% of their total 2020 gold output primarily because of the pandemic and related suspensions. In 2021 gold production is likely to rebound. Based upon mid-point outlook projections, production will be ~6% more than a revised post-Covid guidance for 2020.

The world’s gold mining industry faced unprecedented challenges this year caused by Covid-19 related suspensions that were major factors behind a noticeable production drop recorded in several regions. North America, South America and Africa felt the greatest impact.

The primary factor behind the production decline was both government–mandated and voluntary suspensions.

To analyze a preliminary impact this pandemic has had on gold miners so far, we looked at three reported indicators:

1. Pre-Covid gold production outlook

2. Revised “post-Covid” outlook

3. The most recent 2021 production guidance released by the top 20 gold mining companies that were ranked by the volume of gold projected to be mined out in 2021.

· Silver price unlikely to hit $50 in 2021 but analysts still see potential to outshine gold

Gold will play an important role as investors look for protection against ultra-loose monetary policy and fiscal stimulus measures in 2021, but some analysts expect that the new year will be silver's time to shine.

The silver market has seen a breakneck rally in 2020 as prices more than doubled after falling to a multi-year low around $12 an ounce in March. Many analysts see the current trend continuing as global monetary policies and industrial demand come together to push the precious metal out from gold's shadow.

With gold expected to retest its 2020 all-time highs, some extremely bullish estimates have also crept into the silver market. As silver was able to double in value from the March lows, some analysts have said that the feat can be achieved again in 2021.

While a move back to $50 an ounce is not out of the realm of possibilities, most analysts see a more nuanced rally for the precious metal, with many looking for prices to push above $30.

· Silver technicals still longer-term bullish

The silver market in early 2020 hit a seven-year high of $29.915 and has since backed off that high. The weekly chart for nearby silver futures shows the choppy consolidation of recent weeks has formed a bullish pennant pattern. A move in prices above longer-term chart resistance at $27.50 would produce a bullish upside breakout from the pennant pattern, to then suggest much higher price potential in the coming weeks and months.

Silver prices have a tendency to track gold but as recent months have shown the silver market can actually lead gold prices higher. Look for sideways-to-higher price action in the silver market in 2021.

· In mid-morning trading, the dollar index was slightly lower at 90.256. So far this year, the dollar has fallen 6.5%, its worst yearly performance since 2017. Currency markets also seemed to have shrugged off President Donald Trump’s criticism of the fiscal relief package earlier approved in Congress, which could put the bill in limbo.

· Pound-Dollar Week Ahead Forecast: 1.35-1.37 Range Dominates as Brexit Looms, Deal Births New Era

· Trump again calls for $2,000 checks as Covid aid bill remains in flux

· U.S. government heads toward chaotic end to 2020 as Trump fights Congress

The U.S. government headed toward a chaotic last few days of the year as President Donald Trump’s refusal to approve a $2.3 trillion financial package caused millions of jobless Americans to lose benefits and threatened to shut down federal agencies due to lack of funding.

White House officials have been tight-lipped about Trump’s thinking but a source familiar with the situation said some advisers were urging him to sign the bill because they did not see the point of refusing. Some aides were betting that Trump, who has refused to concede to Democratic President-elect Joe Biden, would relent but admitted he was in an unpredictable mood and could hold out, the source said.

Democrats are on board with the $2,000 payments but many Republicans have opposed it in the past. Many economists agree the financial aid in the bill should be higher to get the economy moving again but say that immediate support for Americans hit by coronavirus lockdowns is still urgently needed.

· Trump signs Covid relief and government funding bill days after he suggested he would block it

President Donald Trump signed a massive coronavirus relief and government funding package into law Sunday, days after he sent Washington into a panic by suggesting he could veto the bill.

· CORONAVIRUS UPDATES:

Global Cases: 81.12M(+402,849)

Global Deaths: 1.77M (+6,928)

U.S. Cases: 19.56M (+124,827)

U.S. Deaths: 341,127 (+1,204)

Brazil Cases : 7.48M (18,479)

Brazil Deaths : 191,146(+331)

U.K. Cases: 2.28M (+30,501)

U.K. Deaths: 70,752 (+316)

TH Cases: 6,123(+103)

TH Deaths: 60

Myanmar Cases: 121,886 (+606)

Myanmar Deaths: 2,601 (+22)

· Fauci warns of post-Christmas surge in Covid infections

· South Africa's total COVID-19 cases cross 1 million mark

· UK records 210 more COVID-19 deaths, cases rise to 34,693

· South Korea extends social distancing steps as new daily COVID-19 cases remain near record levels

· Despite hi-tech advances, many Europeans wary of taking COVID shot

· EU administers first Covid vaccine doses in long-awaited rollout

Doctors, nurses and the elderly rolled up their sleeves across the European Union to receive the first doses of the coronavirus vaccine Sunday in a symbolic show of unity and moment of hope for a continent confronting its worst health care crisis in a century.

Even though a few countries gave out doses a day early, the coordinated rollout for the 27-nation bloc was aimed at projecting a unified message that the vaccine was safe and Europe’s best chance to emerge from the pandemic and the economic devastation caused by months of lockdown.

· Italy kicks off vaccinations against COVID-19 in Rome

· Wars, instability pose vaccine challenges in poor nations

· Cold chain doubts delay COVID-19 vaccinations in some German cities

Germany’s coronavirus vaccination campaign faced delays in several cities on Sunday after temperature trackers showed that about 1,000 of the shots made by BioNTech and Pfizer may not have been kept cold enough during transit.

· China’s vaccines are poised to help less wealthy nations, but face trust issues

With rich countries snapping up supplies of Covid-19 vaccines, some parts of the world may have to rely on Chinese-developed shots to try to conquer the outbreak. The question: Will they work?

There is no outward reason to believe they won’t, but China has a history of vaccine scandals, and its drugmakers have revealed little about their final human trials and the more than 1 million emergency-use inoculations they say have been carried out inside the country already.

Wealthy nations have reserved about 9 billion of the 12 billion mostly Western-developed shots expected to be produced next year, while COVAX, a global effort to ensure equal access to Covid-19 vaccines, has fallen short of its promised capacity of 2 billion doses.

For those countries that have not yet secured a vaccine, China may be the only solution.

China has six candidates in the last stage of trials and is one of the few nations that can manufacture vaccine on a large scale. Government officials have announced a capacity of 1 billion doses next year, with President Xi Jinping vowing China’s vaccines will be a boon to the world.

The potential use of its vaccine by millions of people in other countries gives China an opportunity both to repair the damage to its reputation from an outbreak that escaped its borders and to show the world it can be a major scientific player.

· U.S. holiday retail sales rise 3% as online shopping booms- Mastercard report

· Brexit offers Britain chance to do financial services differently, finance minister says

· PM sold out fish in Brexit trade deal, fishermen say

British fishermen said on Saturday that Prime Minister Boris Johnson had sold out fish stocks to the European Union with a Brexit trade deal that gives EU boats significant access to the United Kingdom’s rich fishing waters.

· China's industrial profits grow robustly, seventh straight rise

Profits at China’s industrial firms grew robustly in November for a seventh month of gains, supported by strong industrial production and sales, as manufacturers continue their recovery from the COVID-19 downturn.

Profits at Chinese industrial firms rose 15.5% from a year earlier to 729.32 billion yuan ($111.50 billion), easing from October’s three-year high 28.2%, data from National Bureau of Statistics showed on Sunday.

China’s industrial sector has seen a strong rebound from the shock of the COVID-19 pandemic, aided by a stunning export comeback as factories ramp up to meet demand overseas. Factory-gate prices, a gauge for profitability, fell less than expected last month.

· Chinese banks to feel fund-raising pain as investors fear bad loans

Chinese banks are expected to face headwinds raising funds next year as profit-conscious investors cling to the sidelines, expecting a wave of bad loans to hammer the sector and erode already slimming margins.

Big and medium-sized lenders also need to improve their capital adequacy as demanded by global and domestic watchdogs.

China’s banks raised 1.2 trillion yuan ($18 billion) in the first 11 months of the year, off the pace of 1.5 trillion yuan for all of 2019, data from Fitch Ratings shows.

The 26 listed banks may need to replenish at least 1.25 trillion yuan of capital in 2021, Shenzhen-based brokerage Guosheng Securities estimates.

· China’s imports of Australian copper concentrate plunge as tensions take hold

· Vietnam's 2020 economic growth slips to 30-year low due to COVID-19

Vietnam’s economic growth slowed this year to its weakest in at least three decades, buffeted by the COVID-19 pandemic, natural disasters and a sluggish global economy, government data showed on Sunday.

The economy expanded 2.91% this year after having posted gross domestic product growth above 7% for two consecutive years, the General Statistics Office (GSO) said in a statement.

The country likely posted a trade surplus of $19.06 billion in the year the GSO said. Average consumer prices rose 3.23%.

· Stocks ready to close out powerful 2020 as risks loom in January

At the close of trading next Thursday, the bull market will be ready to run into 2021 but probably at a slower pace.

January is the month that Wall Street tradition says sets the tone for the year — “so goes January, so goes the year,” as the saying goes. This January could be challenging, with the spreading pandemic slowing the economy and the important Georgia Senate runoff elections on Jan. 5.

On Jan. 20, Joseph Biden will be sworn in as president.

Some strategists expect a pullback early in the year, but the consensus is that the market ends 2021 higher. The average expectation for the S&P 500 at year end 2021 is 4,056, according to a CNBC survey of strategists.

9-month old bull

The S&P 500 heads into the final week of the year with about a 15% gain for 2020, but from the March low the index is up about 65%. The bull market turned nine months old this past week.

According to CFRA’s Stovall, that nine-month gain is more than twice the average nine-month gain of 32.2% for all bull markets since World War II. In the remaining course of the bull markets, their average compounded growth was just 20.3%, showing a slowdown in the rate of gains.

Reference: CNBC, Kitco, Reuters, Worldometers, FXStreet