Gold continued to come under pressure on Thursday, hitting as low as $1,828.76 an ounce, before pared its losses. The surprise surprise in preliminary data boosted risk aversion, but kept sentiment cautious in light of Biden’s upcoming trillion-dollar fiscal stimulus. Despite yesterday’s impeachment of Mr Trump for the second time in his presidency, investors and traders were clearly less concerned about the political risk and more focused on the direction of policy after the handover.
The number of Americans filing new claims for jobless benefits rose by 965,000, the biggest increase since late March last year and a sign that the labor market is continuing to falter as new cases of jobless benefits are rising. At the same time, hiring has shown signs of slowing as a result of the restrictions imposed by the outbreak. Now, the U.S. is planning to speed up vaccine distribution and vaccination. The race between vaccines and the epidemic will determine the future economic recovery. What can help speed up now is fiscal stimulus.
Biden’s proposed package is said to be worth about $2 trillion, significantly adding to the $900 billion in relief approved by Congress. This is larger than most investors had predicted and will include direct payments to households, states and localities. “Essentially, the market has been at a standstill for the last three days as traders have been waiting for news from Biden,” said David Madden, market analyst at CMC Markets.
In terms of vaccines, Johnson and Johnson in the US says a one-shot vaccination regimen is about 90 per cent effective after injection. But the pharmaceutical giant’s encouraging research results were offset by manufacturing delays, with production likely to be deployed by the end of the quarter. In addition, AstraZeneca says its two doses can be given at intervals of eight to 12 weeks. What needs to be watched now is whether regulators can speed up the approval process so that more vaccines can be rolled out as quickly as possible, while being safe, so that multiple companies can produce them at the same time and effectively increase the number of vaccines in a short period of time.
In a new twist, the United States is not planning to impose an investment ban on Alibaba, Tencent and Baidu, which means American investors can continue to invest in the three companies. But the US banned imports of cotton and tomato products from Xinjiang, placed Cnooc on an economic blacklist and put Beijing’s Tianjiao Airlines on a list of military end-users. As a result, tensions remain between the US and China, which is still fuelling safe-haven demand.
Technically, the 200-day moving average remains the key technical level that has supported gold’s latest decline over the past week, but it is now being questioned again. Staying above this level, buyers still have a key line of defense as the New Year begins, but if it stays below, sellers will build a more bearish bias.
If gold moves back below its 200-day average, there is a key trendline support level dating back to March of last year, around $1,819, to watch. This will provide an additional support before the downside hits $1,800, with further support looking towards the November 30 low of $1,764.80.
In addition, according to the monitoring data of the world’s eight major gold ETFs on the gold information website www.24K99.com, as of January 13, 2021, the total holdings of the world’s eight major gold ETFs were 2,003.837 tons, a decrease of 10.5 tons compared with the previous trading day.
If US 10-year Treasury yields reverse trend and start rising again, reducing negative real yield spreads, gold could suffer another sustained selloff, MarketPulse notes. The US stimulus package of $1.5tn – $2.0tn May be enough to reverse the balance.
Michael Hewson, the chief market analyst at CMC Markets UK, said: “We have uncertainty about the outlook for the fiscal stimulus package in the coming months and until we get more detail gold could move in either direction.”