International spot gold on Wednesday (March 3) fell more than, the lowest hit $1708.36 / ounce, $1710 or even $1700 pass are in danger. Worryingly, analysts view any rebound in the short term as a short selling opportunity, making sentiment somewhat one-sided. Treasury yields rose again, helping the dollar regain positive momentum. The situation has improved significantly as a result of accelerated vaccination, while the dollar has been further supported by an upbeat economic outlook, such as large fiscal spending plans. That is seen as another factor driving money out of dollar-denominated commodities.
In the United States, ADP added 117,000 jobs in February, compared with an expected increase of 177,000 and a revised gain of 195,000. ‘The labor market continues to recover slowly across the board,’ said Nela Richardson, ADP’s chief economist. ‘We’re seeing larger companies increasingly feel the effects of COVID-18, and job growth in the commodity-producing sector is stalling.’ With the epidemic still dominant, the service sector remains well below pre-epidemic levels.
In terms of outbreaks, the number of confirmed cases of COVID-19 has been decreasing in recent weeks as a global vaccination program has begun, but Brazil has again created new risks. Epidemiologists warn that Brazil has identified a new strain of the virus that has caused worldwide alarm. With such a large population at risk, the scale of the infection produces dangerous mutations.
On the other hand, U.S. President Joe Biden, after passing a new $1.9 trillion fiscal stimulus package, is still not immune to the risks posed by the epidemic. The details also show that Biden has pushed back the deadline to vaccinate all American adults. So while the situation has improved significantly, the possibility of a relapse under the threat of a new variant of the virus cannot be ruled out, which adds to the uncertainty of the future situation.
Technically, while sentiment is generally bearish at the moment, continued gold strength would negate the bearish outlook and trigger a new round of short covering. Gold could then return to the $1,800 level and eventually head for the strong resistance area around the 200-DMA at $1815-16.
On the upside, the $1,725-1,723 area now seems to be resisting the current downside and is supported around the $1,707 area near yesterday’s volatile low. Failure to hold such support could see gold fall below the $1,700 mark and accelerate toward the crowded $1,675 – $70 area. This should be a strong foundation, and if this support is decisively broken, it should pave the way for an extension of the nearly seven-month downtrend.
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 March 2, 2020, the total holding of the world’s eight major gold ETFs was 1906.317 tons, an increase of 0.81 tons from the previous trading day.
In its latest outlook, Fitch said it expected the gold price to weaken further over the next few years, with prices expected to reach $1,400 in 2022 and $1,200 in 2023. But in the short term, Fitch still sees higher gold price expectations in 2021 and 2022 due to increased investment flows and central bank buying demand.
Chris Weston, Pepperstone’s head of research, also echoed the market’s expectations, saying that although sentiment in the gold market had become extremely bearish, it was unlikely to turn around any time soon. Investors need to keep a close eye on Treasury yields as the market appears to disagree with the Fed on the likely timing of future rate increases.