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Gold Price Forecast – Gold Markets Pullback to 200 Day EMA

Gold markets have broken down significantly during the trading session on Tuesday, losing roughly 1.5%. We have filled the gap and beyond from the Monday session to reach towards the 200 day EMA. The 200 day EMA of course will offer a significant amount of support.

Pay close attention to the US dollar, because that obviously has a certain amount of attention as well. The US Dollar Index has turned around to show signs of life again, and therefore it could work against the value of gold. That being said, I think there is plenty of support all the way down to the $1800 level, possibly even the $1750 level. If we do break down below the $1750 level, then the market is likely to go much lower. Until then, I am simply waiting to see some type of supportive action in order to get involved to the upside. We do not have some type of bounce and confirmation. To the upside, I believe that the 50 day EMA above would be massive resistance, but if we can break above there then it opens up the possibility of gold going towards the $1900 level, possibly even the $1960 level after that.

 

·         Spot gold, meanwhile, fell 1.4% to $1,835.11 per ounce. U.S. gold futures settled down 1.6% at $1,833.40.

 

·         Silver may weaken if gold does not move higher, HSBC analyst James Steel said in a note.

The current gold/silver ratio is “well below historical averages, and investors may recognise this level as straying too far from historical norms”.

 

·         Silver slides as retail rush retreats

Silver slid more than 8% on Tuesday as small investors retreated after a rally to a near eight-year peak the previous session fuelled by a social media-driven trading frenzy.

Spot silver fell 8.2% to $26.59 an ounce. On Monday, it surged 7.3% to its highest since February 2013.

“It appears that the attempted short squeeze by the smaller retail traders has at least temporarily failed,” said Kitco Metals senior analyst Jim Wyckoff, adding retail investors were looking for other markets to impact.

Contributing to the pullback, the CME Group raised maintenance margins on silver futures by 17.9% on Monday to tackle unusual market volatility. Also, posts on the WallStreetBets Reddit forum at the centre of the last week’s action encouraged traders to steer clear of silver.

“If these Reddit investors are going to try to squeeze the silver market, they’re going to have to do it this week, otherwise it’s going to be a flash in the pan,” Kitco’s Wyckoff said.

The market gyrations invited scrutiny from the U.S. commodities regulator.

“A coordinated surge in investment by retail traders into the silver market would simply raise volatility and generate small regional dislocations in supply-demand dynamics,” Goldman Sachs said in a note.

The largest silver-backed exchange traded fund, the iShares Silver Trust, added about 20 million ounces of silver to its holdings on Monday, following a record inflow of about 34 million ounces on Friday.

Platinum declined 3.5% to $1,088.59, while palladium fell 0.2% to $2,241.14.

 

·         Global gold production to bounce back with 5.5% growth in 2021 after COVID-19 hit output in 2020

After declining in 2019, global gold production was adversely affected by the COVID-19 pandemic in 2020, while suspension of expansion works and contractions from mines nearing closure also added to the decline. Overall, output was estimated to have declined by 5.2% to 108 million ounces (moz), according to GlobalData, a leading data and analytics company.

Gold production is expected to increase by 5.5% in 2021 to 113.9moz and grow to 124.1moz by 2024 – a 2.9% compound annual growth rate (CAGR). Canada, Indonesia, Peru, and the US will be the key contributors to this growth. Combined production in these countries is expected to recover from an estimated 20.1moz in 2021 to 25.3moz in 2024.

 

·         Gold, silver coin demand surging, straining U.S. Mint's capacity

The United States Mint said on Tuesday it was unable to meet surging demand for its gold and silver bullion coins in 2020 and through January, due partly to pandemic-driven demand and plant capacity issues.

Sales of U.S. gold bullion coins rose 258% in 2020 while silver coin demand was up 28%, the U.S. Mint said Tuesday. Heavy buying has continued in 2021, it said, squeezing supplies, which had already been tight as the coronavirus affected production.

A social media-driven buying spree lifted silver futures to an eight-year high on Monday, but dealers in the market for coins were already grappling with a supply shortage and shipping delays before that rally.

In January, 220,500 American Eagle gold bullion coins were sold, up 290% from 56,500 a year earlier, the Mint said.

 

·         Biden said Republican proposal for $600 billion in COVID-19 aid 'way too small': Schumer

U.S. Senate Democratic Leader Chuck Schumer said President Joe Biden told Democrats the proposal ten Senate Republicans have made for $600 billion in COVID-19 relief is “way too small.”

Schumer spoke to reporters after an online meeting of Senate Democrats with the president about Biden’s $1.9 trillion COVID-19 relief proposal.

 

·         The Democratic-led U.S. House of Representatives prepared to take the first step forward on President Joe Biden’s $1.9 trillion COVID-19 relief package.

U.S. government bonds yields moved higher early on Tuesday, after Senate Majority Leader Chuck Schumer and House Speaker Nancy Pelosi introduced a budget resolution on Monday.

This is the initial step toward using the reconciliation process that requires only a majority vote in Congress to pass.

 

·         Treasury's Yellen says U.S. 'desperately' needs Congress to act on stimulus

 

·         Dallas Fed President Kaplan stresses need for more spending to keep economic recovery going

Dallas Federal Reserve President Robert Kaplan in a CNBC interview Tuesday backed more spending across a variety of fronts as the economy tries to shake off the Covid-19 pandemic effects.

President Joe Biden has proposed spending $1.9 trillion to provide more cash payouts and enhanced unemployment benefits to Americans, as well as a minimum wage hike, funding for vaccine programs and aid to schools along with state and local governments.

Congressional Republicans have set forth a more modest $618 billion plan that would provide lower direct payments and no funding for state and local governments.

While not endorsing either plan, Kaplan said additional fiscal help is needed for an array of still-pressing priorities.

“It’s critical we have money to do vaccinations and testing. It’s critical that people who are out of work have continued relief beyond March,” the central bank official told CNBC’s Steve Liesman during a “Squawk Box” interview.

“It’s critical we have enough money to reopen schools, and one of the big issues in this pandemic is women with children have disproportionately left the workforce. So getting schools reopened in person, having money for that and money for child care is going to critical to getting that group back into the workforce. We need it if we’re going to grow faster.”

 

Dallas Fed’s Kaplan: Vaccinations are critical to economic recovery

Dallas Fed President Robert Kaplan sat down with CNBC’s Steve Liesman to discuss the state of the economy, the effect of the coronavirus pandemic on the outlook, vaccination efforts and more.

 

·         Low U.S. short-term rates likely a fixture in 2021 amid excess cash

Excess liquidity in the short-term U.S. lending market recently knocked overnight interest rates to almost zero, and risks pushing the federal funds rate to negative territory, a scenario that could cause disruptions in money markets.

 

·         Biden to review U.S. access to goods needed to deal with pandemic

President Joe Biden is planning to take an executive action mandating a review of critical U.S. supply chains with an eye to securing U.S. industrial supplies made by competitors including China, according to four people familiar with the matter.

The action, which will focus both on government contractors and private industry, aims to ensure the United States can supply the goods it needs to combat the COVID-19 crisis, as well as other critical technology and raw materials, the sources said.

 

CORONAVIRUS UPDATES:

 

Global Cases: 104.37 (+437,575)
Global Deaths: 2.26M (+14,381)

 

No. 1

U.S. Cases: 27.02M (+109,746)
U.S. Deaths: 457,794(+3,570)

 

No. 2 -6

India Cases: 10.77M (+11,000)

Brazil Cases: 9.28M (+56,240)

Russia Cases: 3.88M (+16,643)

UK Cases: 3.85M (+16,840)

France Cases: 3.22 (+23,337)

 

Asian Updates:

No. 37

Japan Cases: 391,626 (+2,108)
Japan Deaths: 5,794 (+72)

 

No. 83

China Cases: 89,594 (+30)
China Deaths: 4,636

No. 86

South Korea Cases: 78,844 (+336)
South Korea Deaths: 1,435 (+10)

 

No. 115

Thailand Cases: 20,454 (+836)
Thailand Deaths: 79 (+2)

 

·         Russia’s Sputnik V vaccine 91.6% effective in late-stage trial

 

·         Yellen and Mexican finance minister discuss digital taxation

 

·         U.S. cool to, but does not reject, Iran's idea on reviving nuclear deal

 

·         Iran deepens breach of nuclear deal at underground enrichment site

Iran has deepened a key breach of its 2015 nuclear deal, enriching uranium with a larger number of advanced centrifuge machines in an underground plant as it faces off with the new U.S. administration on salvaging the accord.

 

·         Euro zone contracts by 6.8% in 2020 on coronavirus restrictions shock

The euro zone economy dropped by 0.7% in the final quarter of 2020 as governments stepped up social restrictions to contain a second wave of Covid-19 infections, Europe’s statistics office said on Tuesday.

A preliminary reading points to an annual GDP contraction of 6.8% for the euro area in 2020, Eurostat said.

The region had experienced a growth rate of 12.4% in the third quarter as low infection rates at the time had allowed governments to partially reopen their economies.

However, the health emergency deteriorated in the last three months of 2020, with Germany and France going as far as reintroducing national lockdowns. The tightening of the social restrictions weighed on the economic performance once again.

 

·         Italy's president calls on Draghi to save country from crisis

Italian President Sergio Mattarella looks set to ask former European Central Bank chief Mario Draghi to form a government of national unity to tackle the twin coronavirus and economic crises battering the country.

The head of state summoned Draghi for talks on Wednesday at noon (1100 GMT) after hearing that efforts to salvage the collapsed coalition of Prime Minister Giuseppe Conte had failed.

 

·         Italian president summons ex-ECB chief Draghi for govt. talks

Italian President Sergio Mattarella has summoned former European Central Bank President Mario Draghi for talks on Wednesday, an official announced just minutes after the head of state said he wanted to put together a new, “high profile” government.

The back-to-back announcements meant Draghi would almost certainly be asked to lead a government of national unity to help Italy face the coronavirus emergency and manage the economic crisis.

 

·         Italy's 5-Star will not back a government led by Draghi: senior politician

Italy’s anti-establishment 5-Star Movement, the largest group in parliament, will not back a new government led by former ECB president Mario Draghi, a senior party source told Reuters on Tuesday, declining to be named.

 

·         Alphabet revenue grows 23% but cloud business still losing billions, lagging competitors

 

Shares of Alphabet, the parent company of Google, rose nearly 8% in extended trading on Tuesday after the company reported fourth-quarter earnings that surpassed analysts’ expectations and showed a strong return to growth in its core advertising business.

Here’s how the company did:

Earnings: $22.30 per share, adjusted, vs., $15.90 per share as expected by analysts, according to Refinitiv.

Revenue: $56.90 billion, vs. $53.13 billion as expected by analysts, according to Refinitiv.

Google Cloud: $3.83 billion, vs. $3.81 billion as expected by analysts, according to StreetAccount.

YouTube ads: $6.89 billion, vs. $6.11 billion as expected by analysts, according to StreetAccount.

Traffic acquisition costs (TAC): $10.47 billion, vs. $9.32 billion as expected by analysts, according to StreetAccount.

 

·         Reddit user who helped inspire GameStop mania says he lost $13 million on Tuesday, but is still holding on

 

·         GameStop plunges 60%, has lost more than 70% of its value since Friday

 

·         Robinhood eases trading limits on restricted stocks, customers can buy 100 GameStop shares now

Reference: FXEmpire, CNBC, Reuters, Worldometers, GlobalData