International spot gold on Wednesday (November 25) low consolidation, as low as $1801.55 / oz after some stabilization, with the 200-day moving average on strong support temporarily held at 1800 integer just above the threshold. While a number of recent factors appear to be working against gold, the fact is that a Yellen job could lead to a more unified U.S. fiscal and monetary policy that would keep the U.S. loose for longer, with low interest rates an important factor supporting the price of gold.
In terms of the epidemic, nearly 60 million cases and more than 1.4 million deaths have been confirmed globally. In the United States, where confirmed cases are rising at a record rate, health care workers have warned that clinics and emergency rooms are overwhelmed. Analysts are waiting for the latest fiscal and monetary announcements from governments and central Banks to help economies recover from the outbreak. It can be seen that in the short term, there is still a need for safe haven, and gold bulls should not give up easily until a vaccine is actually launched and can help contain the outbreak.
A slew of heavy U.S. economic data, including third-quarter GDP, consumer spending, THE PCE price index, durable goods orders and jobless claims, were mostly in line with expectations and so didn’t make much of a dent.
On the other hand, despite the recent sharp decline in gold, the DOLLAR index has also come under pressure to remain near lows, which will limit the downside potential of gold. As the dollar’s decline makes dollar-denominated gold cheaper for buyers of other currencies, buying interest has increased.
In addition, the fed minutes to be released later in the day will be in focus as Treasury Secretary Steven Mnuchin and Fed Chairman Colin Powell differ over whether to keep emergency lending programs, making the prospects for further stimulus uncertain. As a result, more short-term gold sellers are expected to emerge if the US government and The Fed are seen as failing to rescue the economy.
On a technical basis, gold halted its rally on a daily chart and turned down again, but remained above the key 200-day moving average of $1,798. The 14-day relative strength index was trading in the bearish territory but was not oversold, suggesting more downside. A break below the 200-day moving average could trigger a sharp retreat towards gold’s May 18 high of $1,765. Meanwhile, as long as gold remains below a strong resistance level of $1,850, the bearish bias will not change.
It has been a rollercoaster year for gold, starting the year at $1,550 an ounce, dropping to a low of $1,450 in late March and peaking at $2,050 in August, according to CIBC. There is no denying, however, that the overall trend is still upward, with gold now up 15 per cent from the start of the year and CIBC strategists predicting an even stronger performance of $2,300 an ounce in 2021.
George Gero, managing director at RBC Wealth Management, said: “The game changer is the ability of all vaccines to show good promise.” Under such circumstances, he added, it would take a long time for gold prices to recover.