Spot gold continued its slide on Monday, touching as low as $1,764.34 an ounce, with bulls now trying to defend the $1,770 mark. Gold fell 4.5% last week and is on track for its worst month in four months. Spot prices have fallen more than $300 since hitting an all-time high of $2,075 in August. Gold’s safe-haven appeal has been undermined by economic optimism. In addition, U.S. banking giants Citigroup and Goldman Sachs cut their gold price forecasts for 2021, also in line with gold’s weakness. Gold will need further fundamental news to stabilize and rebound. It will only do so if the economic recovery accelerates and demand picks up, which is unlikely to happen any time soon.
Morderna expects its coVID-19 vaccine to be approved in the UK soon. Every Monday for the last three weeks of November, a candidate vaccine is announced as the result of a trial of highly effective prevention, prompting optimism among traders. The positive news is also that President-elect Biden will try to address the prospect of a pandemic while also promoting economic recovery with a new economic stimulus package. For these reasons, global stock markets had a surprisingly good month in November. MSCI’s global stock index has surged more than 13% this month to an all-time high and is on track for its best monthly performance since its creation in 1990.
Still, safe-haven demand is providing some floor support for gold. The accelerating rise in confirmed COVID-19 cases in the US, whether OPEC + will extend supply restrictions and Washington’s expanded ban on Chinese companies suspected of military ties have investors wary. Meanwhile, the day of the killing of An Iranian nuclear weapons expert continues to grow. Iran’s foreign minister blamed Israel for the attack. This has reignited tensions in the Middle East.
On the other hand, this week’s brexit vote is coming to a head. Britain and the European Union resumed face-to-face talks on a trade deal on Saturday in a last-ditch effort to end the transitional period just five weeks away. The EU said last week that it hoped to reach some sort of agreement this week. But if something unexpected happens, it will have some impact on market risk sentiment.
Technically speaking, the current gold price decline is still very strong: gold price broke the EMA 5, 8, 13 and 21, and the four moving averages are bearish. The MACD index continued to trend downward after breaking the signal line, while the slow stochastic remained within the oversold range.
With gold falling below the 38.2 percent Fibonacci retracement of the 2020 low to high of 1836.97, a near-term top has been confirmed and a further slide towards the 50 percent Fibonacci level of 1763.36 cannot be ruled out. The path of least resistance for gold is the trend downward.
Walsh Trading director Sean Lusk said the investors who came in late to chase the rally were those who had recently left the market. “The last to get in is always the first to get out, and those who got in at $1,920 an ounce have cleared out. “Gold has been very steep, it has fallen a lot.”
Lusk thinks gold could fall another $60 to $70, with a downward trend likely to reach below $1,700 an ounce. Next year, however, the market is likely to move higher again, as the beginning of the year tends to be a good time for gold.
ANZ reported that the themes were similar across the market, with the dollar weakening as risk sentiment improved. “This sentiment is likely to continue well into the Fed’s December decision on interest rates, at which time it is likely to take additional action, as in the short term the US economy is still affected by the outbreak.”