Gold retreats as dollar, Treasury yields rebound
· Gold prices fell on Thursday as U.S. Treasury yields and the dollar rebounded, while investors awaited details on incoming U.S. President Joe Biden’s coronavirus stimulus proposal.
· Spot gold fell 0.3% to $1,838.39 per ounce by 0317 GMT, while U.S. gold futures slipped 0.9% to $1,838.90.
· Benchmark 10-year Treasury yields rose to hover near ten-month highs, also helping lift the dollar against rival currencies.
· Markets are eyeing Biden’s economic relief plan due later in the day and estimated to cost “trillions” of dollars in an effort to deliver immediate pandemic “rescue” efforts.
· “Fiscal stimulus will help boost economic recovery, leading to rising real interest rates as well as bring up Fed’s tapering hopes; on the flip side, it will also increase the inflation outlook,” said DailyFX strategist Margaret Yang.
So, gold will be struggling around these price levels as the stimulus will have both positive and negative impacts on it, she added.
· Investors will also be focused on further clues on the U.S. monetary policy outlook when Federal Reserve Chairman Jerome Powell participates in a virtual event, due at 1730 GMT.
· The Fed said on Wednesday the U.S. economy was growing modestly, although the optimism was tempered due to a surge in coronavirus cases.
· “I don’t think the Fed is serious about tapering anytime soon, given the pandemic situation and fragile economic recovery, however, any hint about tapering maybe in the slightly longer horizon will trigger some jitters among gold traders,” Yang said.
· The U.S. House of Representatives passed a single article of impeachment accusing President Donald Trump of “incitement of insurrection”, making him the first president in U.S. history to be impeached twice.
· Gold Price News and Forecast: XAU/USD drops $20 as Biden set to announce $2 trillion stimulus
Breaking: Gold drops $20, T-yields spike as Biden set to announce $2 trillion stimulus
On the report, Gold saw a quick drop of about $20 to near $1832 levels, as the sell-off in the US Treasuries fuelled a 2% jump in the 10-year Treasury yields, prompting a fresh bounce in the US dollar index.
Asia Market: Signs of sunny days ahead
With short dollar trades tempering over the great US dollar debasement story of 2021, it's not such an easy glide path for gold to start the year. So, I suspect gold remains tied to the hip of the US dollar fortunes this quarter. The market then morphs into "sell the rally mode" as the US economy recovers tangentially to the vaccine distributions.
· Gold and Global Economic and Covid-19
“A global economic relapse from COVID-19 or any other unforeseen risks could result in weak consumer demand, thus creating a headwind for gold’s performance,” according to World Gold Council.
But even if the economic situation remains uncertain, that could still give gold prices an upshot – from investment funds focussed on stocking up bullion.
“Historically, this behaviour has occurred as investors look for high quality liquid assets, such as gold, in these risk-off environments,” WGC adds.
Favourable turn
Even at $1,800 plus levels, shoppers are starting to return. According to jewellery retailers in Dubai, November and December recorded the best levels of 2020, with even first-time buyers convinced by gold holding its own even as most other assets saw value drops. (And all this while tourist-led buying is still largely absent.)
Much the same is being witnessed in the world’s top two gold consuming markets – China and India.
“Although global economic growth is likely to remain anaemic relative to its full potential for some time, gold’s more stable price performance since mid-August may foster buying opportunities for consumers,” WGC reports.
“Given the positive link between economic growth and Chinese demand, we believe that gold consumption in the region may continue to improve.
“Similarly, the Indian gold market appears to be on a stronger footing. Initial data from the Dhanteras festival in November suggest that while jewellery demand was still below average, it had substantially recovered from the lows seen in second quarter of last year.”
Getting adjusted
All this while gold prices were “comfortably above” $1,850 for most of third and fourth quarters and finishing the year at $1,887.60.
Gold clearly has convinced quite a few shoppers to get back to buying even at these levels. Some price stability should bring more of them to the shops… provided there are no further economy- or job-related shocks in store during this year.
And it could turn into a gold rush if at all prices drop to around $1,600 or under, which is where gold was at on January 1, 2020. And then came COVID-19 as a full-blown pandemic.
· Gold Price Analysis: XAU/USD’s path of least resistance appears down, eyes on Powell, Biden – Confluence Detector
Gold (XAU/USD) is licking its wounds after tumbling $20 in a quick move earlier in the Asian trades. Reports that a bigger-than-expected US stimulus plan worth $2 trillion is due to be announced by President-elect Joe Biden knocked-off the US Treasuries, fuelling a rebound in the US dollar and Treasury yields.
The expectations of a higher US fiscal stimulus plan are likely to keep the bounce in the Treasury yields intact. Therefore, the risks remain skewed to the downside in gold in the lead up to the US weekly jobs data and the Fed Chair Powell’s speech. Although a bounce cannot be ruled out after the sharp move to the downside.
Technically, gold faces healthy resistance levels, which again makes the downside more compelling.
Gold Price Chart: Key resistances and supports
The Technical Confluences Indicator shows that gold sees major support at $1836, the convergence of the pivot point one-day S2 and Bollinger Band four-hour Lower.
The next powerful support awaits at $1828, which is the confluence of the previous week low, previous low on four-hour and Bollinger Band one-day Lower.
A failure to resist above the last could put the $1825 support at risk. That level is the intersection of the Fibonacci 61.8% one-month and pivot point one-day S3.
On the flip side, immediate resistance is seen around $1842, where a dense cluster of hurdles is lined up. It is the confluence zone of the SMA200 one-day, pivot point one-day S1 and previous high one-hour.
The buyers will then target the $1850 barrier, where the Fibonacci 23.6% one-day lies.
Further up, a relevant barrier at $1853 is likely to be a tough nut to crack for the XAU bulls. It’s the meeting point of the previous high four-hour and Fibonacci 38.2% one-day.
The further upside is going to be an uphill task for the bulls, with multiple strong hurdles in the way towards the $1860 level. The Fibonacci 23.6% one-week coincides with the pivot point one-day R1 at the latter.
· Silver rose 0.1% to $25.16 an ounce. Platinum climbed 0.4% to $1,098.34, while palladium eased 0.3% to $2,378.37.
Reference: CNBC, FXStreet, Gulfnews
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