The demand for gold diminished at the last trading session of the week, as it fell to $1,700 territory — the first time since June.
What we know
Gold futures lost about 1.3% to close at $1,1781.90/ounce. It dropped as low as $1,770.65, a price not seen since June 22.
Gold bulls have been under intense pressure amid significant sell-offs recorded in recent times, amid positive news on COVID-19 vaccines coupled with strong bias coming from the world’s largest economy, hinting that there would be a smooth transition of power. All of these factors have kept gold bulls in the dust.
What this means
Gold traders are arbitrarily reducing their long bets, as it seems odd for any investor to go bullish on the precious metal, taking to account that it’s set for the third straight weekly loss.
Stephen Innes, Chief Global Market Strategist at Axi, in an email sent to Nairametrics, gave key fundamentals giving the gold bears enough gas to break the precious metal below the $1,800 price level:
“The positive correlation between gold and the SPX since March flipped after Pfizer’s vaccine announcement on Nov. 9, while negative real yields are not having a positive effect on the precious metal. A transition from disinflationary to inflationary support for gold could take time and ultimately leaves prices vulnerable to more profit-taking and the establishment of more shorts in the near-term.
“Gold rout continues as investors embrace vaccine news. The break of USD1,800/oz support may take prices near USD1,750/oz as surging investor optimism due to promising COVID-19 vaccines has undermined gold and silver.”
What to expect
The precious metal will continue to be under immense pressure from the gold bears, taking into account the commanding macro theme related to a vaccine recovery and the reduced risks associated with central bank’s debt monetization, or the pursuit of quasi-modern monetary theory.