International spot gold continued to tumble on Tuesday (November 24), hitting as low as $1801.37 / oz. The $1800 level is at risk and is beginning to test key support below, namely the 200-day moving average of $1796.35 / oz. As this is very close to the round 1800 level, bulls are not expected to give up easily. Positive vaccine news and better economic data have shown signs of gold and stock market decoupling, with gold prices still unable to mount an effective counterattack even as the dollar remains low. The key factor is that while the need for safe haven remains, the more influential risk of inflation may be reined in.
The head of the US general Services Administration has begun providing federal resources for a transition of power despite Donald Trump’s failure to concede defeat 20 days after the election, breaking the impasse over the administration and removing some of the uncertainty about a smooth transition. That means biden’s team will have access to government databases and federal agencies, in addition to the necessary funding.
Also on Monday, it was reported that Biden will choose former Federal Reserve Chair Janet Yellen as the new Treasury secretary. Analysts at Deutsche Bank reckon Ms Yellen will “probably try to bring fiscal and monetary policy more into line” and quickly reverse the US Treasury’s intervention in lending facilities.
“We expect her to favor more easing, which should help the Fed’s agenda,” said John Hardy of Saxo Bank. We can expect Treasury yields to rise as emergency spending increases.”
The emergence of these two conditions, the market risk effectively improve mood, to a certain extent, weaken the safe-haven buying of gold, at the moment is focused on, if she really served as finance minister in the United States, what will follow in the future what easing, which will directly affect the outlook for inflation, and this is the golden bull recently a boost from the most important factors.
On a technical note, the daily chart showed gold closing below 61.8 percent Fibonacci retracement at 1836.16 on Monday, with support expected from the psychological $1,800 / oz level. If gold closes below this level, the bears will challenge the 50% Firpo level at 1765.27, or even a 50% to 38.2% retracement range between 1689.20 and 1765.27.
“Investors clearly believe that the arrival of the vaccine means that the U.S. economy is restarting,” said Han Tan, a market analyst at FXTM. “They are looking ahead and think the downside risks are limited.”
Kyle Rodda, the 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 / oz suggests further weakness to the 1700 level before buyers re-enter the market.”