Spot gold volatility intensified on Monday, with the highest breaking the $1,900 mark and the lowest falling below $1,855, before recovering to near parity in a fierce battle between bulls and bears. Although gold and equities had shown signs of decoupling as the economy recovered, the emergence of a new, more infectious strain of the virus in the UK led to a replay of the early days of the outbreak, with a rebound in the dollar and sharp falls in equities prompting investors to sell gold to raise margin calls.
On Saturday, British Prime Minister Boris Johnson announced the toughest social restrictions since the March lockdown, including more than 16 million people in the southeast of England. He also warned that the novel Coronavirus variant could increase the speed of transmission by 70%. Poland and Turkey issued orders, with Germany, France, Italy and Ireland among the first countries to ban travellers from the UK on Sunday. Belgium, Austria, Finland and the Netherlands have also banned British travellers. It is now known that Denmark, the Netherlands and Australia have all been infected with the new variant of the virus, while Italy has also found its first confirmed case at the Sirio military Hospital in Rome.
This new strain of COVID-19 has once again caused panic in global markets, mainly because people are worried about whether it means that the newly launched COVID-19 vaccine will become ineffective. If it does, it will undoubtedly be a blow to the global economy to get out of the shadow of the epidemic. However, Jens Spahn, the German health minister, said in an interview on Sunday evening: “Based on the information we have and the discussions we have had with experts from European institutions, it is clear that the new variant has no impact on the vaccine and that the vaccine is still effective.”
On the other hand, experts from the Biological Center of the University of Basel in Switzerland and the Austrian Academy of Sciences in Vienna have shown that the mRNA COVID-19 vaccine is capable of responding to the mutation of the virus. So, even with some variation, the immune system can still recognize the pathogen and protect the vaccinator. Still, it’s worth keeping an eye on what happens after that.
Concerns about the mutation of irus from novel Coronavirus quickly offset the optimism generated by the passage of the fiscal stimulus bill in the United States. Members of Congress will vote within days, and U.S. Treasury Secretary Steven Mnuchin is expected to begin handing out checks directly next week. Nonetheless, if the market panic gradually stabilizes, the progress of the fiscal stimulus bill is expected to have a positive impact on the market.
Technically, gold prices are still tilted to the downside. At the same time, KDJ indicators appear top deviation, indicating that prices have downward correction pressure. If the K line today recorded star line or negative line, then the rally or face exhaustion, the risk of further retreat rising, do not rule out falling to 182-1800 area.
In addition, analysts have pointed out that gold seems to be building a cross-star shape with a long shadow, which when combined with the overbought CCI indicator and bearish IG client sentiment indicator suggests that further gold gains may be elusive.
In addition, holdings in eight of the world’s leading gold ETFs were 1993.785 tonnes as of December 18, down 0.3 tonnes from the previous trading day, according to data from the gold information website www.24K99.com, which monitors the world’s eight major gold ETFs.
Charlie Nedoss, senior market strategist at LaSalle Futures Group in Chicago, said gold at $1,914 an ounce will be a strong resistance level this week. But if it falls below 1877, it could turn downward.
But MarketPulse points out that gold itself has resistance at $1,900, more at psychological levels than technical levels. More importantly, the 100-day moving average (DMA) is just over $1,904.70. A daily close above this level would be a favorable technical development, paving the way for a further rise to $1970.00 over the Christmas holiday period.