On Monday (November 23) in the Asian session, the DOLLAR index was under pressure to fall, now at around 92.25. Spot gold rose on the back of a weaker dollar, trading at around $1,873 an ounce, with prices briefly topping $1,875 an ounce in Early Asian trading. Analysts said that while a weaker DOLLAR was positive for gold prices, optimism about coVID-19 weighed on prices, limiting gains. Investors will be watching this week for updates on the coVID-19 vaccine and the US election. In addition, the release of Federal Reserve minutes and the appearance of several Fed officials this week are expected to have an impact on the dollar and gold. On the economic front, investors will be greeted this week with key data such as U.S. GDP, which could also influence gold prices.
Spot gold closed down nearly $20 last week, with positive news on coVID-19 becoming the biggest downside driver.
Us biopharmaceutical company Moderna announced last Monday that the vaccine had a efficacy of 94.5 per cent, based on a mid-stage analysis of a late-stage clinical trial. The CEO of Moderna has described the safety of the novel Coronavirus vaccine as a “game changer” with 20 million doses on the market by the end of the year.
Pfizer announced last Wednesday that a vaccine it developed with BioNTech, a German biotech company, was 95 percent effective in the final analysis of clinical trials and met the requirements for emergency licensing. Pfizer, which has said its covid-19 vaccine prevents 90 percent of infections, expects to apply for emergency use authorization in late November. If successful, that means the vaccine could be available in the United States by the end of the year.
Pfizer has submitted an application to the US Food and Drug Administration (FDA) for emergency authorization to use a coVID-19 vaccine developed with BioNTech on November 20, local time.
Moncef Slaoui, chief operating officer of Operation Curvature Speed, the US coVID-19 vaccine development program, said the vaccine could be distributed as soon as December 11.
Britain could give regulatory approval this week to a novel coronavirus vaccine developed by Pfizer and BioNTech, the Telegraph reported On Nov 22.
Despite the upbeat news on the coVID-19 vaccine, a weaker dollar boosted gold prices. Moreover, expectations of more stimulus from the U.S. government remain supportive of gold prices. Gold, seen as a hedge against inflation and currency depreciation, is up more than 23 percent this year, thanks largely to global stimulus measures to mitigate the impact of the pandemic.
U.S. Treasury Secretary Steven Mnuchin indicated Thursday that talks on stimulus measures would continue. “With the increase in confirmed COVID-19 cases, expectations for more government stimulus are rising,” said Phillip Streible, chief market strategist at Blue Line Futures.
Edward Moya, senior market analyst at OANDA, noted, “The key issue remains the novel Coronavirus and the short-term stress it will bring not only to the United States but also abroad. It will force Congress or the Fed to do more.”
The WEEKLY FX168 financial Market survey, released Saturday, showed analysts and traders were evenly split on the outlook for gold this week. Among traders and analysts surveyed weekly on financial markets, 45 per cent were bullish on gold and 10 per cent were bearish on the metal.
Ole Hansen, head of commodity strategy at Saxo Bank, said gold prices were likely to continue to fall as more vaccine news boosted investor optimism. However, he added that there was still too much uncertainty and stimulus in the market to expect a sharp fall in gold prices. “I’m bullish on gold, but I’m not in a rush to buy it,” he said. I would see a break below $1,850 and a test of the 200-day moving average as buying opportunities.”
If gold were to break through resistance levels of $1,875.00 an ounce, this would push gold to its first bullish target of $1,901.80 an ounce, according to an article on Economies.com. Gold needs to stay above $1,860.90 an ounce to keep the bullish argument alive.
This week’s Fed minutes hit America’s GDP
Looking ahead to this week, investors will continue to focus on coVID-19 news. In addition, the uncertainty surrounding the OUTCOME of the U.S. presidential election is good for gold prices, and investors will be watching this week.
Markets will be focused this week when the Fed releases its minutes. On the economic front, major ECONOMIES in Europe and the United States will release PMI data for November this week, while the United States, Germany and France will report revised GDP figures for the third quarter.
A number of fed officials will speak this week, including San Francisco Fed President Richard Daley, Chicago Fed President Charles Evans, St. Louis Fed President James Bullard and New York Fed President William Williams. Investors will be watching what they say about the economic outlook and monetary policy.
The Minutes of the Federal Open Market Committee’s November monetary policy meeting will be released at 03:00 Hong Kong time on Thursday.
Analysts said the Fed minutes could provide a clue to further action. With risks to the job market mounting as coVID-19 spreads rapidly in the US, Fed officials are likely to discuss issues such as an increase in asset purchases.
The FOMC was unchanged at 0-0.25 per cent on November 5, local time, and its asset purchase programme was unchanged.
The LANGUAGE in the FOMC statement after the meeting was little changed, although the committee noted that the U.S. economy was growing but had not yet reached the levels seen before the novel Coronavirus pandemic. “Economic activity and employment have continued to recover, but remain well below the levels seen at the start of the year,” the statement said.
Federal Reserve Chairman Colin Powell said last Tuesday that the economic recovery “has a long way to go” and the Fed pledged to use all its tools to support it if necessary.
Kyle Rodda, analyst at IG Markets, said: “There is a lack of catalysts for gold to move higher. There has been a slight dampening of inflation expectations, which has weighed on gold prices as it is now clear that fiscal stimulus in the US may not be as big as previously thought.” Rodda also noted that the focus now is on the Federal Reserve supporting the U.S. economy as coVID-19 cases surge.
This week, investors are bracing for a slew of key U.S. data, including revisions to third-quarter GDP, November PMI in manufacturing and services, the Conference Board consumer confidence index, and last week’s jobless claims. Among them, THE US GDP data will be the most important.