Gold prices have been mixed lately, with sellers continuing to focus on the $1800 threshold. Gold languished at a one-week low amid a quiet trading session. The US, Europe and Asia epidemics continue to weigh on sentiment, with fears of infections and deaths rising, while good news that the new crown vaccine protects against the mutant strain continues to provide dollar support, prompting gold to face unclear guidance at risk. Former Federal Reserve official Janet Yellen’s commitment to the greenback also continued to provide support, and the Standard & Poor’s 500-stock index rebounded, again denting the possibility of higher gold prices.
Gold was down 0.72 percent at $1, 815.40 as of 8:18 a.m. in Hong Kong.
Fundamental analysis: market risk aversion in favor of the dollar weekend no major news driven
Looking back last week, gold continued to be supported by optimism about U.S. Democratic presidential candidate Joe Biden’s new fiscal stimulus measures. But risk aversion is shifting toward the dollar, and sources around incoming Treasury Secretary Janet Yellen say she is likely to prefer the market-determined dollar, making her the only official U.S. official to make such a statement. It is also worth noting that there is still widespread skepticism about the acceptance of Biden’s financial aid plan and the effectiveness of fiscal stimulus measures on the market, given the risk of an early crackdown. This means that gold sellers have been unnerfed by the recent mixed signals.
Ms Yellen will appear before the Senate Finance Committee on Tuesday, where she will be confirmed. Ms. Yellen is expected to reiterate her commitment to market-determined exchange rates at the meeting, making clear that the U.S. won’t seek a weaker dollar to gain a competitive advantage (neither will it seek a weaker currency, nor will it oppose attempts by other countries to do so), according to people familiar with the matter. Such a statement would represent a departure from America’s laissez-faire approach to the dollar, which Mr Trump has often publicly called for to be devaluated. Officials said Ms. Yellen would use more precise language in her testimony to reflect the long-term monetary policy of the United States over the past two decades.
The latest news from the UK on the Covid-19 outbreak and global vaccine hopes helped gold and silver rally. So far, the new crown vaccine has been found to cure the variant strains found in the UK and South Africa. With multiple mutant strains around the world, is the vaccine still effective? Yang Xiaoming, chairman of Sinopharmaceutical China Biotech, said that during the research and development process, researchers have carried out experiments on a variety of mutant strains from different regions, as well as comprehensive experiments on serum from volunteers immunized in the first and second phase of clinical trials. There is clear data showing that the vaccine protects against a variety of mutant strains. When immunized, the inactivated vaccine neutralizes all the different variants, including the British strain, and perhaps the eight or nine that have been isolated around the world.
Despite continued support from the vaccine, the epidemic in the UK has not improved and London has announced it will tighten restrictions starting this week. In Asia, Japan and Malaysia are both facing a surge in confirmed cases and there is skepticism that China can overcome a new pandemic, with Japan providing an additional catalyst. Market action was also limited by the closure of the US for the Martin Luther King Day holiday.
Against that backdrop, the S&P 500 rebounded from a two-week low and also reversed a two-day losing streak, rising 0.30 percent to 3,757.12. China’s key GDP, sales and industrial production data for the fourth quarter are also expected to guide gold’s near-term direction, with GDP likely to improve from 4.9% to 6.1% and quarterly to 3.2% from 2.7% previously. Retail sales are also likely to rise to 5.5% from 5.0%, while industrial production is likely to fall to 6.9% from 7.0% in November.
A significant downward break of gold’s 200-day moving average could help gold sellers conquer the uptrend support line since March 2020, currently near $1,825. It should be noted that last week’s high of $1,865 will challenge gold’s recovery above $1,846.