Gold bulls took a big hit this week, with spot gold ending the week below the crucial $1,800 an ounce level, taking its weekly decline to nearly $85. Gold prices have been hit by renewed optimism among investors that the coVID-19 vaccine will lead to a rapid global economic recovery. In addition to the positive news on coVID-19, the GENERAL Services Administration said this week that biden’s transition process could officially begin, and lower uncertainty over the outcome of the U.S. election also hit gold prices.
For the week, spot gold closed down $84.71, or 4.5 percent. Gold opened at $1,870.13 an ounce this week, closing at $1,786.13, touching as high as $1,876.01 and as low as $1,774.00, shaking more than $100.
News of the coVID-19 vaccine came
Gold prices fell sharply in the first two trading sessions of the week on optimism about the coVID-19 vaccine. Astrazeneca, the British pharmaceutical giant, said on Monday that interim analysis of clinical trials showed that its coronavirus vaccine provided an average of 70 percent protection against the virus.
Pfizer and Moderna have also reported a series of encouraging results from vaccine trials in recent weeks, with coVID-19 efficacy of about 95 percent. The introduction of the coVID-19 vaccine will boost economic performance and reduce demand for safe-haven gold.
Delivery of the coVID-19 vaccine could begin as early as next week, US President Donald Trump said on Nov 26. Mr Trump made the announcement in a video exchange with TROOPS stationed outside the US. Trump noted that those on the front lines, medical workers and the elderly will be the first to be vaccinated. Mr. Trump did not disclose which vaccine would be delivered first to the United States.
Stephen Innes, chief global market strategist at Axi, a financial services company, said: “The vaccine news has greatly dented gold’s appeal and will continue to do so until we finally move from deflation to inflation.”
Lachlan Shaw, head of commodities research at National Australia Bank, said the gold market had entered a new phase because of the vaccine news. “If long-term real U.S. interest rates remain at current levels, it will be very difficult for gold to break back above $1900 and $2,000 an ounce,” Shaw said.
Trump: If the Electoral College votes for Biden, I’ll leave office
On November 23 local time, the General Services Administration (GSA) informed Biden that he could officially begin the transition. Expectations of a smooth transition for the White House have reduced uncertainty and undermined safe-haven demand for gold.
Kyle Rodda, analyst at IG Markets, said a smooth transition of power in the United States would also be more positive for its economic recovery, meaning there is a bit less market risk.
“Gold’s break below the support level of $1,840 an ounce suggests a further decline to the $1,700 an ounce level before buyers re-enter,” Rodda said.
The White House has approved the Office of the Director of National Intelligence (ODNI) to provide Biden with daily presidential briefings as part of the transition process, a spokesman for the office announced November 24. The President’s daily briefing on national security threats and intelligence is designed to prepare the President, his security advisers and senior White House officials to make decisions in real time.
U.S. Secretary of State Mike Pompeo said November 24 that the State Department has begun the process of transition and will complete all work as required by law.
Biden will receive his first presidential daily briefing on Monday, according to Jen Psaki, a spokeswoman for Biden’s transition team.
On November 25 local time, the State Department informed staff that the transition process had begun and that a team had been appointed within the Department to support the transition to the incoming Biden administration.
US President Donald Trump said on November 26 that Biden will leave the White House if he is declared the winner of the election by the Electoral College. Asked if Biden would leave the White House on Inauguration Day, January 20, if the Electoral College votes to confirm him as the winner, Trump replied: “Of course I will. And you know it.” It was the closest Mr Trump has come to backing down.
But Mr. Trump added that if electors voted for Mr. Biden, “they made a mistake.”
The electoral College, which represents each state, will convene on December 14 and present their electoral votes to the President of the Senate and the National Archives; On January 6, Congress will convene a joint session to count the electoral votes and officially declare the electoral College vote.
Several U.S. media outlets estimate Biden won the November 3 election with 306 electoral votes, well over the required 270, while Trump won 232. With the votes counted so far, Biden leads Trump by more than 6 million in the popular vote.
Although Mr Trump has authorised the transition process, he has refused to give in to Mr Biden and has continued to claim “widespread electoral fraud”. In response, Mr Biden said he had been “confident of winning this election” despite efforts by Mr Trump’s team to overturn the results in key states.
Gold lost a key support of $1,800 an ounce on Friday
Gold broke below a key support level of $1,800 an ounce on Friday and fell to a near five-month low. Growing optimism that the US economy will recover quickly on the back of a vaccination drive and a smooth transition at the White House pushed stocks to new highs.
Spot gold closed at $1,786.13 an ounce, down $21.92, or 1.21 percent, after touching as high as $1,813.76 an ounce and as low as $1,774.00 an ounce.
Michael Hewson, chief market analyst at CMC Markets UK, said: “Having fallen below $1,800, gold is likely to fall further towards $1,760 as optimism over the possible introduction of vaccines continues to dampen demand for this traditional safe haven asset.”
Craig Erlam, analyst at OANDA, added: “As soon as gold broke through the key $1,800 level, it triggered a sell-off. With strong fundamentals like vaccines, gold is likely to test the $1,750 level.”
Optimism about vaccines and investors betting on a stabilization in global trade under Biden put further pressure on gold and sent U.S. stocks soaring to record highs.
“There is a belief that Biden will take a calmer stance on trade issues with other countries like China, and that is reflected in the stock market,” said Natixis analyst Bernard Dahdah.
Mike Zigmont, head of trading and research at Harvest Volatility Management, said: “The environment for risky assets is getting better as drugmakers report more positive data on COVID-19 and political risks are moderating.”
In addition to coronavirus and election news, investors will also be focused on next week’s U.S. non-farm payrolls report, which is expected to spark market activity.
Next week, the November NON-farm payrolls report and THE ISM manufacturing and non-manufacturing data are expected to come in slightly above market expectations of 500,000 jobs, while the ISM manufacturing and non-manufacturing data will come in below market expectations, ACCORDING to ING bank. The focus next week will be whether us governors choose to impose tougher lockdown measures after Thanksgiving to contain the second wave.
Wells Fargo is looking ahead to Friday’s November non-farm payrolls report, which is expected to show a gain of 425,000 jobs in November, less than market expectations of 500,000 jobs. Wells Fargo said the coming months were critical for a job market recovery. With a new coronavirus vaccine on the horizon, economic life may begin to return to normal next summer.
The market is expecting further weakness in the near term, according to Kitco News’ weekly gold survey released on Friday. Most Wall Street analysts are pessimistic about gold next week, with retail investor optimism still below 50 per cent after hitting multi-year lows last week, according to the poll.
Fifteen analysts responded to the survey this week. Six analysts (40 per cent) expect gold to rise next week; Meanwhile, eight analysts (53%) expect gold to fall; One analyst (7%) is neutral on gold.
With gold falling below a key support level of $1,800 an ounce. Analysts say the next major support point to watch is $1,750 an ounce. For many analysts, the biggest hurdle for gold is the latest news about a potential vaccine.
“The vaccine outlook and stronger interest rates spurred strong selling from bulls and gold etfs,” said Marc Chandler, chief market strategist at Bannockburn Global Forex in Bannockburn. Momentum traders have joined in, trading from short positions.”
Adrian Day, chief investment officer at Adrian Day Asset Management, said he expects gold prices to fall next week as the market has further to fall after falling below its 200-day moving average.
A recent report from CPM Group, a commodity consulting firm in New York, noted that gold’s decline may not end anytime soon. A drop to $1,650 an ounce should not be ruled out if gold then falls below the key level of $1,750, the report said.
Despite the generally bearish sentiment, some analysts see the current sell-off as a buying opportunity.
Ole Hansen, head of commodity strategy at Saxo Bank, said he remains bullish on gold in the short term. He added that Friday’s sell-off came in very light conditions as many traders continued to celebrate the US Thanksgiving Day holiday. Hansen says he sees weaker prices as a buying opportunity.