Gold held up its gains in European trading on Wednesday, breaking further above the $1,820 mark and continuing its steady rise to stand above the $1,830 mark. Hopes of a new round of FISCAL stimulus in the United States have bolstered gold’s rally from multi-month lows this week.
Gold rose for the second day in a row, after rising on Tuesday as the dollar tumbled. The dollar index fell to a 2-1/2-year low on the day, benefiting dollar-denominated gold. Today’s theme is investors’ reaction to the prospect of fiscal stimulus in the US.
It was announced On Tuesday that U.S. Treasury Secretary Steven Mnuchin and House Speaker Nancy Pelosi had resumed talks to implement $980 billion worth of epidemic assistance policies by March 31, including $228 billion worth of protection funds for hotels, restaurants and other small businesses. Ms. Pelosi said Tuesday that the two sides would review the plan.
That revived hopes that US fiscal policy would once again pump billions of dollars into the economy, reviving a broader trend of selling dollars and buying gold.
Investors also expect the Federal Reserve to act to support the U.S. economy through this difficult winter, because even if the vaccine is successful, it will take time for it to become widely available. And monetary policy will no doubt continue to pressure the dollar, more gold. Any signal of further easing at the Fed’s next monetary policy meeting on December 15-16 will no doubt deepen current market moves.
In recent congressional testimony, Federal Reserve Chairman Colin Powell and U.S. Treasury Secretary Steven Mnuchin both called for more help for small businesses in the face of a severe outbreak, as they may not be able to sustain the vaccine until it is widely available to contain the outbreak.
On the other hand, expectations that vaccines will contain the outbreak and prompt a rapid economic rebound could also limit gold’s gains. Britain is expected to start vaccinating the public before the end of the year, the report said. “We expect to have tens of millions of doses of vaccine across the UK by the end of the year,” Health Secretary Jeremy Hancock said after the drug regulator’s approval. The UK also became the first Western country to approve the use of the COVID-19 vaccine. Vaccination is expected to begin next week.
The first batch of the vaccine is expected to arrive in the UK in the next few days, with delivery planned for 2021, Pfizer said. With a third plant in Germany ready, BioNTech will increase vaccine production by 2021.
Meanwhile, the US will receive its first batch of Pfizer vaccine by December 15 and Its first Modena vaccine by December 22, ACCORDING to CNN. The U.S. Department of Transportation said Monday that it is ready to make a “novel coronavirus vaccine in large quantities” and has completed all necessary regulatory measures. By the end of January, officials said, the agency plans to provide doses of the vaccine to about 40 million U.S. residents, or about 20 million doses per month.
“The approval of a highly effective vaccine could mark the beginning of the end of the COVID-19 economic shock,” said Mike Bell, global market strategist at jpmorgan. “It will be the beginning of a new bull market in equities.”
Mark Haefele, chief investment officer at UBS Global Wealth Management, also said: “We see a further upward trend in global equities.”
Rising risk sentiment also means less safe-haven demand for gold.
In addition, traders should also start to pay attention to president-elect Biden’s comments, as he may provide valuable trading guidance. The New York Times reported on Tuesday that Biden would not act immediately to remove the first phase of trump’s trade agreement with China. He said he would first review the agreement and consult with Allies in Asia and Europe to determine a “coherent strategy”.
Biden also said his priority would be to secure a generous epidemic assistance bill before he takes office on January 20. Janet Yellen, biden’s nominee to be the next Treasury secretary who accompanied Him to the meeting, said the country was in a time of disaster and needed to act quickly to avoid a downward spiral.
Investors throughout the day will also be focused on the U.S. ADP employment data, known as the small non-farm farm, which should provide some guidance to market expectations ahead of Friday’s non-farm payrolls data. Still, the data clearly came in second to the news on vaccines and fiscal stimulus. The market is likely to remain optimistic about the latter for now as the bipartisan talks resume, providing further support for risk assets and gold and enhancing the bearish outlook for the dollar.
For subsequent movements in today’s gold, FXEmpire expectations, said this week is what gold has showed traders expect gold will continue to be volatile in the near future, and the ups and downs have a space in which to stimulus bill’s bullish news is short squeeze, and attract buyers, and vaccine want to keep the pressure on gold prices, because the success of the vaccine may speed up the recovery and reduce the need of further fiscal and monetary stimulus.
After gold broke through $1,818.00 an ounce, the next bullish target was $1,838.10, according to Economies.com. As long as gold stays above $1,795.00 an ounce, it will continue to be forecast to be in a bullish trend, and if it falls below that level, it will push gold back into a major bearish trend.
In a recent report, analysts from ANG Traders said they expect gold to rise to $1,900 as it rebounds from key support levels around $1,770, a 50 percent retreat from its March low to its August record high. While gold still has room to rise in the near term, Mr ANG said the medium-term outlook looked less bright. “In the medium term [six months], gold is likely to weaken, but after that, it is likely to enter a secular bull market,” analysts said.
Gold futures rebounded sharply yesterday from $1,774 an ounce, Kshitij Advisory services said. As long as it holds short-term support at $1,780 – $1,760 an ounce, gold futures could again test $1820-1,840 an ounce before heading back lower again. Gold futures are likely to remain in a wide range of $1840-1740 an ounce over the next few weeks.