On Thursday (November 26) in the Asian session, the DOLLAR index fell slightly, and has now fallen below 92; Spot gold rose modestly, now at $1,811 an ounce or so, the dollar fell back positive gold trends. The weaker-than-expected U.S. jobless claims data on Wednesday hurt the dollar and helped gold rebound, but gains were limited by earlier upbeat news on the coVID-19 vaccine. Also contributing to the recent pressure on gold prices was a reduction in U.S. political uncertainty after the GSA said the Biden transition process had officially begun. Democratic presidential candidate Joe Biden will receive his first presidential daily briefing on Monday, according to new reports.
Gold rose on Wednesday as U.S. jobless claims unexpectedly rose. Spot gold closed at $1,807.73 an ounce, up 29 cents, or 0.02 percent, after peaking at $1,817.59 an ounce.
New CLAIMS for jobless benefits in the US rose further last week, suggesting that a surge in COVID-19 cases and business restrictions are driving job cuts and undermining the Labour market recovery. The weak economic data weighed on the dollar, benefiting dollar-denominated gold.
The Labor Department says 778,000 Americans applied for jobless benefits last week. Economists surveyed by Dow Jones expected claims to be 733,000.
The dollar index.DXY closed down 0.16%, at 92.02. The dollar index fell toward 91.90 in intraday trading on Thursday. The dollar’s decline is likely to continue, as the introduction of the vaccine and Mr. Biden’s selection of former Federal Reserve Chair Janet Yellen as the next Treasury secretary have eased two big uncertainties for investors.
Junichi Ishikawa, senior currency strategist at IG Securities, said, “The rise in yields may provide some support for the dollar, but the general direction is that the dollar will move lower. The trend has shifted in favour of risky assets. Yellen will work with the Fed to support the economy. U.S. interest rates are going to be low for a long time.”
The federal reserve released the minutes of its November 4 solstice5 policy meeting on November 25, local time. Fed officials were involved in detailed discussions about its asset purchase program at a meeting earlier this month, the minutes show. Some members at the meeting said they expected some changes to be made.
“Participants noted that, in appropriate circumstances, the Committee could provide additional easing measures, such as accelerating the pace of its purchases or converting purchases of Treasuries into longer-maturity treasuries without increasing the scale of its purchases,” the minutes said. Or, where appropriate, a committee could provide more leeway by purchasing at the same pace and composition over a longer period of time.”
Jim Wyckoff, senior analyst at Kitco Metals, said the jobless claims data were supportive of gold prices “just based on the view that we have a very dark period ahead before we get through this pandemic.”
“The decline in the dollar, combined with technical support for gold around $1,800, has convinced some people that they might stop selling and take some positions,” said Bart Melek, head of commodity strategy at TD Securities in New York. The next six months will be difficult; “We will experience significantly lower than potential growth rates and governments and central Banks will have to significantly increase stimulus measures to ensure that the second wave does not turn into a prolonged period of economic underperformance.”
Sunilkumar Katke, head of currency and commodities at Axis Securities, said the weaker dollar was a good opportunity for investors who missed out on buying gold in March.
Analysts said that while the dollar’s temporary retreat was positive for gold prices, recent coVID-19 news, which has influenced gold prices, could still play a role. Positive news on vaccines has weighed on gold prices over the past few days.
Spot gold has tumbled nearly $60 so far this week, hitting the $1,800 an ounce mark at one point, as risk sentiment among investors was boosted by hopes for vaccines and the lifting of U.S. political clouds, hitting safe-haven demand.
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.
“We have heard about the vaccine, seen US Treasury yields rise and even the dollar depreciate, and gold is not benefiting… “That’s a very bad signal for gold and means underlying weakness is building up.” A break below the key support level of $1,800 an ounce would trigger further declines, Boele added.
Gold prices rose again on Wednesday, briefly approaching $1,819.00 an ounce, but have since fallen back and are expected to resume a major bearish trend, according to Economies.com, a leading financial website. As long as gold stays below $1,819.00 and $18,30.00 an ounce, the bearish scenario will remain valid for some time to come.
The caveat, Economies.com added, is that gold needs to fall below $1,794.84 an ounce to open the way for a further bearish target of $1,765.00 an ounce.
Independent analyst Robin Bhar said, “It’s clearly bargain-hunting at the moment. Gold has fallen more than $150 in the past two weeks and investors are taking the opportunity to build positions.”
Goldman Sachs commodities analysts Mikhail Sprogis and Jeffrey Currie pointed out that despite the fall in real interest rates and the dollar, gold prices over the past two days have sharply revised and are now close to $1,800 an ounce. Gold’s decline, they argue, is largely due to cyclical factors, a preference for equities and a lack of real change in inflation.
XM senior analyst Marios Hadjikyriacos said gold’s fall, despite a weaker dollar and flat Treasury yields, did not bode well for the metal’s near-term performance.
Peter Hug, head of global trading at Kitco Metals, said the medium-term outlook for gold remained constructive and long-term investors should take advantage of lower prices to rebalance their gold holdings.
“There is a gap to be filled before the vaccine can give everyone the confidence to get the economy back to normal,” said Mr Hug. For me, it takes an extra boost. Politicians may not do it, and I think it would really hurt the stock market, but if they did, I think it would be constructive for gold.”
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.
The U.S. General Services Administration (GSA) has informed Democratic presidential candidate Joe Biden that the agency is ready to begin a formal transition process, according to a letter received by CNN in the afternoon of November 23. The move would also allow the transition process to begin, allow current agency officials to coordinate with the incoming Biden team, and provide millions of dollars in government funding for the transition. Expectations of a smooth transition for the White House have reduced uncertainty and undermined safe-haven demand for gold.
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.
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.
Biden will announce his economic team and other key candidates next week, Reuters reported On November 26, citing transition officials.
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.
On November 25, Biden delivered a Thanksgiving speech urging people to reengage in the fight against coVID-19. Biden also revealed his policy priorities after taking office.
Biden noted that in his first 100 days in office, he wants Congress to pass immigration reform and coVID-19 relief bills.
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.