Spot gold on Wednesday (December 16) hit a peak of $1,865.69 an ounce before losing ground to near flat, with a weak DOLLAR index still providing some support for gold. However, from the perspective of correlation, the correlation between US dollar index and gold price in the recent three months is 0.469, while the correlation between us dollar index and gold price in the recent one month is 0.065, indicating that the US dollar index and gold price not only do not show a negative correlation, but also show a weakening trend.
In the midst of this decline, gold has staged a partial rebound, largely on optimism about us fiscal stimulus talks. At present, the negotiations have entered a critical juncture. On the one hand, congress will be on holiday from December 21st, which means that if it fails to vote on a stimulus this week, the chances of a fiscal stimulus this year will fall sharply, hitting investment sentiment. On the other hand, even though the Electoral College vote is over, the final battle for control of the U.S. Senate will still have to wait until Jan. 5, and with the two parties still deeply divided, a fiscal stimulus by the end of the year remains a long shot.
So while optimism over THE US fiscal stimulus negotiations continues to support gold in the short term, investors need to be wary of the potential downside risk of disappointing expectations.
On the other hand, digital currencies such as Bitcoin continue to eat into gold’s safe-haven buying, making gold’s upward path more difficult. Bitcoin has passed the $20,000 mark for the first time in history as institutional demand for the digital currency has increased significantly. Bitcoin, the world’s most valuable digital currency, rose more than 4 percent in trading to about $20,327, and is up more than 180 percent year-to-date, according to market data from Coin Metrics.
Investors, meanwhile, are still keeping an eye on the latest developments in Britain’s exit from the European Union. “As things stand, I cannot tell you whether there will be an agreement,” European Commission President Jeroen von der Leyen said on Wednesday. But I can tell you that there is a path to an agreement. The path may be narrow, but it is there.”
The immediate focus is on the fed’s interest-rate decision and policy statement. The upcoming Fed meeting may also be bullish for gold, analysts said. In a report published today, ING argues that the core view of the current dollar depreciation is: a) there is an imminent recovery and the Fed will succeed in pushing up inflation; B) The Fed will keep interest rates on hold until 2023. Today’s Fed is unlikely to change either theme. But if the Fed is not dovish enough and there is no real progress on stimulus measures, that will not only hurt stocks, but also dampen demand for gold, Sevens Report Research said.
On a technical daily chart, gold is holding on to 1830 after breaking the 1850-1860 zone last week, and the rally so far this week has shown resistance to breaking the region again, with hopes for a return to the upward trend that began at the start of the month. Near-term upside targets will look at levels such as 1885 and the round number 1900. In the short term, the 1850-1860 zone has been transformed into a support limiting the downside.
In addition, from the perspective of recent institutional holdings, due to the increase in global economic uncertainty and the correction of THE HIGH level of THE U.S. stock market, the institutional bearish attitude towards gold has shifted significantly from December to the cautious one. Global ETF holdings fell in November for the first time in a year and for the second highest monthly net outflow on record, according to the World Gold Council.
Commerzbank said this year’s gains were just the beginning of the bull market in gold. Although the vaccine appears to be a positive turn for the epidemic, it will take a long time for the economy to recover, and many of the positive factors for gold will remain.
Economies.com said it still expects gold prices to remain bullish for both the day and the short term. It is important to note that gold above $1820.00 / oz is important for continued bullish expectations, with gold expected to trade between support at $1840.00 / oz and resistance at $1880.00 / oz.