Gold prices fell Tuesday as the dollar benefited from safe-haven buying sparked by concerns about the Novel Coronavirus variety in the UK.
Spot gold closed at $1,860.69 an ounce, down $16.905, or 0.86 percent, after touching an intraday low of $1,858.82 an ounce and an intraday high of $1,884.18.
COMEX gold futures for February delivery closed down 0.7 percent at $1,870.30 an ounce.
The dollar rose as investors cut exposure to riskier currencies such as sterling, making gold more expensive for holders of other currencies. Novel Coronavirus is facing a variant in England.
A more rapidly spreading strain of the novel coronavirus has been found in the UK, increasing its infectibility by 70 per cent. Flights from The UK to Spain, India and Hong Kong have been suspended after the discovery of the novel Coronavirus strain. More than 40 countries around the world have imposed entry bans on the UK.
New sources have revealed that British Prime Minister Boris Johnson is considering a novel Coronavirus blockade of more parts of England to curb the novel coronavirus epidemic.
At the same time, the European Commission recommended that EU member states suspend their current travel ban on the UK, so that freight and basic traffic can resume as soon as possible and EU residents can return to their homes. The European Commission says EU residents returning from Britain should be allowed to travel if they have a negative nucleic acid test or are quarantined for 10 days after entering the country. It is understood that the commission’s proposal is only a unified proposal at the LEVEL of the European Union. National border control is not subject to this proposal, and each country has the right to implement its own border control policies. Germany, for example, has announced that it will extend its travel ban on the UK until 6 January.
Meanwhile, data released on Tuesday showed the U.S. economy grew at a record pace in the third quarter.
The latest data from the US Commerce Department showed that the us real GDP in the third quarter rose to an annualised 33.4%, a record high.
The US economy grew at a record pace in the third quarter, driven by more than $3tn in epidemic relief funds, critics said. As the year draws to a close, however, the US economy appears to have run out of steam as COVID-19 cases surge and fiscal stimulus fades.
“The stronger dollar has limited some of gold’s upside momentum,” said Suki Cooper, an analyst at Standard Chartered bank.
Gold hit a six-week high of $1,906.46 on Monday as the US Congress approved a $892bn coronavirus aid package to support the hard-hit economy.
“Gold risks are tilted to the upside as we move into 2021 as we expect the DOLLAR to weaken and monetary policy to remain accommodative, but year-end profit-taking is likely to limit near-term gains.” Cooper said.
Gold, seen as a hedge against inflation, is still up more than 23 per cent this year on the back of massive stimulus measures around the world.
Phillip Streible, chief market strategist at Blue Line Futures, said, “If the new strain does enter the U.S. and reinfects people, it could really cause some additional economic damage, which could be the next positive for gold.”
Fundamentals are bullish
1.US President Donald Trump has signed a seven-day government spending bill allowing the government to continue operating through December 28. The Senate had earlier voted to pass a comprehensive package of about $900bn in bail-out packages and $1,400bn in government appropriations. Progress on fiscal stimulus has helped boost demand for gold.
- U.S. data released on Tuesday showed the Conference Board’s consumer confidence index rose to 88.6 in December, the lowest since August, and forecast 97. The previous reading was revised down to 92.9 from 96.1. Weak data tend to weigh on the dollar, giving dollar-denominated gold a boost.
- The Federal Reserve said it would continue to support the economy and pledged to continue buying Treasuries until the US recovers from the unemployment of COVID-19. Federal Reserve Chairman Colin Powell called the current recession “unprecedented in its severity” and said it would take some time for the economy to reach pre-outbreak levels. Gold got a boost from the Federal Reserve’s pledge to support the economy.
Fundamentals negative factors
- The latest data from the US Department of Commerce showed that the us real GDP in the third quarter reached an annualized final rate of 33.4%, a record high. The US economy grew at a record pace in the third quarter, driven by more than $3tn in epidemic relief funds, critics said. The strong economic data boosted the dollar and weighed on dollar-denominated gold.
- On 14 December, the United Kingdom reported to WHO that a new novel Coronavirus variant had been discovered through viral gene sequencing. Preliminary analysis showed that the variant was more likely to spread from person to person, with an estimated 40 to 70 percent increase in infectivity and 0.4 in the transmission index between 1.5 and 1.7. Dollar-denominated gold has been hit by concerns over the rapid spread of a new strain of coronavirus in the UK, sending investors seeking a safe haven in the greenback.
- The European Medicines Agency on Monday gave a positive assessment of the safety and efficacy of a novel coronavirus vaccine developed jointly by Pfizer of the United States and Germany’s Biotechnologies, before the European Commission approved the vaccine for sale conditionally in the EU. Emergency use licenses for Moderna and Pfizer COVID-19 vaccines have been approved in the United States. The introduction of COVID-19 vaccine has boosted economic growth prospects, while depressing gold prospects.
1.Suki Cooper, analyst at Standard Chartered, said: “With gold up more than 20 per cent his year, it is vulnerable to profit-taking before the end of the year, but some risks remain against the backdrop of tighter blockade and restrictions, new strains of the virus and brexit negotiations.”
- “The stimulus talks are over… [But] I’m not very optimistic about gold at the moment. I don’t think it has the firepower to break through on the upside, “said Phillip Streible, chief market strategist at Blue Line Futures in Chicago. “If the new strain does come into the U.S. and reinfect people, it could really cause some additional economic losses, which could be the next positive for gold.”
- Market analyst Rajan Dhall wrote on Tuesday that the recent daily chart of gold futures looks more promising. After a series of highs and lows, the chart structure presents a very interesting picture. Prices are now converging into a bull flag pattern, and a breakout to the upside on good volume could signal the start of another bull market, Dhall said. Dhall noted that there are some key upticks to watch. The first is the current high of $1909.7 an ounce, with a breakout at $1966.1. If a breakout is achieved with good volume, it would be a good sign that an all-time high of $20,89.2 / oz is just around the corner. On the downside, $1,851 / oz is preliminary support, but the stronger support area is at $1761.4 / oz.