International spot gold on Wednesday (January 20) rebounded strongly after a short-term decline, hitting a high of $1,870.38 an ounce, trying to regain above the $1,870 mark, while gold prices fluctuated sharply, the dollar also fell after a rally. The whole gold market is now on the sidelines, waiting for something to happen. Although Democrats control both houses of Congress and the White House, passage of the Biden aid package is not guaranteed. Now that Biden is in office, he is about to sign a series of executive orders that could set the tone for future market sentiment.
Day markets focused on Biden’s inauguration. The announcement came after Trump left the White House and flew early from Washington. In the morning local time, Trump flew aboard Marine Corps Flight One to Joint Base Andrews in Maryland, where he held a brief farewell ceremony. Other top Republicans, including Senate Republican Majority Leader Mitch McConnell and House Republican Minority Leader Kevin McCarthy, skipped Trump’s farewell ceremony and will attend Biden’s inauguration. It shows the Republican Party is already deeply divided about Mr. Trump, with markets even interpreting his recent talk of forming a new party as a way to put pressure on the party.
The $1.9 trillion fiscal stimulus is getting the most attention for Mr Biden’s latest policy. On the one hand is whether the plan can be passed successfully, on the other hand is whether the scale of the fiscal stimulus can reach the expected $1.9 trillion. The analysis points out that the “inflation trade” in the expectation that stimulus and new vaccines will boost economic growth and inflation has sent investors back to stocks that were neglected during the pandemic, such as banks and industrials.
At the same time, the dollar will also be a key driver of gold in the near term. Mark Haefele, chief investment officer at UBS Global Wealth Management, said in a research note that Yellen’s comments on the dollar ‘won’t reverse the dollar’s weakness.’ He points to the Fed’s expansionary monetary policy, which keeps interest rates at zero and could last for years, as one reason for the dollar’s expected weakness in 2021.
In addition, the U.S. -China relationship is another issue that will be closely watched by the new administration. For a while before Jan. 19, Mr. Biden and his team had been cautious about taking firm positions on China. But with the transition of power, Biden’s team has gradually begun to loosen its grip on China. On Jan. 19, “China Challenge” and “Overcome China” were the loudest slogans in Congress.
In a cluster of four hearing yesterday, the American secretary of state-designate blinken, American intelligence director nominated crowd, yellen, America’s Treasury secretary, nominee and the United States secretary of defense nominee Austin, the new four American government always character collective statement shows that the new government could continue trump’s tough on China government policy. This leaves Sino-US relations still facing a severe test, which may directly affect market risk sentiment.
Technically, Economies.com sees gold poised for further gains after breaking resistance at $1,850.80 an ounce, with the next target at $1,871.55. $1,850.80 is the Fibonacci retracement of 23.6% of gold’s decline from the $1959.30 area.
The 200-day moving average (DMA) is currently at $1844.00 and will continue to be the intra-day pivot point. The 50-DMA at $1859.00 and then the $1865.00 area continues to be a barrier to further gains.
Howie Lee, analyst at OCBC Bank, said: “The $2,000 gold price is still possible, probably in the middle of the second quarter, when a lot of people have been vaccinated, there will be a lot of cash in the system and demand is almost back to normal. That’s when people will start to pay a lot of attention to inflation.”
Jeffrey Sica, the founder of Circle Squared Alternative Investments, said that “as long as [equities] gain this upward momentum, gold will trade relative to its range.” He added that the prospect of more stimulus measures was very positive for gold.