News & Analysis at your fingertips.

We use a range of cookies to give you the best possible browsing experience. By continuing to use this website, you agree to our use of cookies.
You can learn more about our cookie policy here, or by following the link at the bottom of any page on our site.

0

Notifications

Notifications below are based on filters which can be adjusted via Economic and Webinar Calendar pages.

Live Webinar

Live Webinar Events

0

Economic Calendar

Economic Calendar Events

0
Free Trading Guides
Subscribe
Please try again
EUR/USD
Mixed
Oil - US Crude
Mixed
Wall Street
Mixed
Low
High
of clients are net long.
of clients are net short.
Long Short

Note: Low and High figures are for the trading day.

Data provided by
Gold
Mixed
Low
High
of clients are net long.
of clients are net short.
Long Short

Note: Low and High figures are for the trading day.

Data provided by
GBP/USD
Mixed
USD/JPY
Mixed
More View more
Breaking news

New Zealand Dollar on the move as home prices may be considered in RBNZ's remit

Real Time News
  • The New Zealand Dollar surged 0.6% against the greenback after its Finance Minister Grant Robertson raised concerns over rising house prices to the central bank, proposing the RBNZ to consider adding house prices as a factor when making monetary decisions https://t.co/C1poEj06Kr
  • I wonder if any other central banks would follow the lead of the RBNZ on pressure to factor in housing prices in monetary policy. Go way out on a limb and perhaps even consider capital market asset inflation...probably not https://t.co/Cke07Or35H
  • EUR/CHF IG Client Sentiment: Our data shows traders are now net-long EUR/CHF for the first time since Nov 16, 2020 08:00 GMT when EUR/CHF traded near 1.08. A contrarian view of crowd sentiment points to EUR/CHF weakness. https://www.dailyfx.com/sentiment https://t.co/WJ7ZCwf3Ak
  • NZD soaring on this as such an addition to the RBNZ's remit lowers the need to ease policy, given the current backdrop of rampant house prices https://t.co/2fx0VTUOZh
  • BoJ Governor Kuroda: Won't hesitate to add easing if needed BoJ measures are having a positive impact Nervousness in financial markets has eased somewhat - BBG $JPY #BoJ
  • 7 out of 11 S&P 500 sectors ended higher, with 73.1% of the index’s constituents closing in the green on Monday. Cyclical energy (+7.09%) , financials (+1.88%) and industrials (1.64%) were among the best performers, whereas real estate (-0.34%), healthcare (-0.30%) were lagging. https://t.co/bDpvRqEX4u
  • #ASX200 looking poised to extend its recent run higher as RSI climbs back into overbought territory Key resistance levels falling at the 50% (6674) and 61.8% (6755) Fibonacci's $XJO $ASX https://t.co/E7VADxCJ1o https://t.co/T3ICLoE9du
  • Euro Price Action Setups: EUR/USD, EUR/JPY, EUR/GBP Levels to Watch - https://www.dailyfx.com/forex/technical/home/analysis/eur-usd/2020/11/24/Euro-Price-Action-Setups-EURUSD-EURJPY-EURGBP-Levels-to-Watch.html $EUR $EURUSD $EURJPY $EURGBP https://t.co/qxHSS90Rnd
  • BoJ Governor Kuroda: Japan's economy has picked up, still in severe state - BBG $JPY
  • NZ FinMin Robertson: Proposes RBNZ consider house prices in monetary policy Urges RBNZ to give earliest possible consideration Seeks advices on more measures to curb housing demand - BBG $NZD
Gold Prices Regain Strength After Falling 4.5% as Vaccine Enthusiasm Fades

Gold Prices Regain Strength After Falling 4.5% as Vaccine Enthusiasm Fades

2020-11-10 06:00:00
Margaret Yang, CFA, Strategist
Share:

GOLD PRICE OUTLOOK:

  • Gold prices rebounded to US$ 1,880 after hitting a six-week low of US$ 1,850 after vaccine news
  • Vaccine optimism faded quickly, buoying precious metal prices. The US Dollar fell
  • 89% of the retail gold traders (within IG)are net long gold, up 23% from a day ago
Advertisement

Gold prices tumbled 4.5% on Monday as a coronavirus vaccine developed by Pfizer and BioNTech showed a 90% success rate in an interim analysis of its phase 3 clinical trial. Optimism faded quickly however, as traders reassessed the near-term implications, with the global economy facing an imminent threat of another pandemic wave and virus-related lockdown measures. Even if the vaccine is proven successful, it may still take months before it passes all the regulatory requirements and becomes publicly available. Manufacturing capacity, storage and transportation are future challenges too.

One of the main drags on gold prices is the prospect of smaller fiscal and monetary stimulus if economic growth accelerates with the help of the vaccine. The expansion of central banks’ balance sheets, alongside an ultra-low interest rate environment, have propelled a big rally in precious metal prices this year. This is because gold is commonly viewed as a good hedge against fiat money and a store of value. In the medium- to long-term, however, a slower pace of monetary easing and potential tapering may put gold at risk for a pullback.

The Federal Reserve balance sheet fell marginally to US$ 7.157 on November 4th from a record high of US$ 7.177 trillion in late October, reflecting ample liquidity in the markets (chart below).

Gold Prices Regain Strength After Falling 4.5% as Vaccine Enthusiasm Fades

In the near term, however, fiscal stimulus might still be needed in the US and the EU to weather through the pandemic’s impact. The monetary environment is likely to remain accommodative in the foreseeable future to prevent systemic risk and foster a fragile recovery. This might help to cushion the downside for gold prices. Uncertainties surrounding the post-election transition, pandemic, and a tepid economic outlook may also lift appetite for gold.

In view of a historic negative correlation between gold and the US Dollar (chart below), a weakening US Dollar may buoy gold prices. Biden’s election victory and the potential reshaping of US foreign policy appeared to have accelerated capital flows into emerging markets and risk assets, sinking the US Dollar.

Gold Prices Regain Strength After Falling 4.5% as Vaccine Enthusiasm Fades

Source: Bloomberg, DailyFX

Technically, gold prices plunged 4.5% on Monday, registering their largest intraday swing seen since mid-August. The overall trend appears to lack clear direction after prices broke above the ceiling of the consolidative range (highlighted in chart below) before plunging below the lower boundary. The formation of a large bearish candlestick usually suggests strong downward momentum, which could lead to further losses with an eye on US$ 1,885 support.

Gold PriceDaily Chart

Gold Prices Regain Strength After Falling 4.5% as Vaccine Enthusiasm Fades
Gold MIXED
Data provided by
of clients are net long. of clients are net short.
Change in Longs Shorts OI
Daily -2% 8% 0%
Weekly 10% -5% 7%
What does it mean for price action?
Get My Guide

IG Client Sentiment indicates that retail gold traders are leaning heavily towards the long side, with 89% of positions net long, while 11% are net short. Traders have added long (+23%) positions and slashed short (-47%) bets overnight. Compared to a week ago, traders have increased long (+13%) and cut short (-36%) exposure.

Building Confidence in Trading
Building Confidence in Trading
Recommended by Margaret Yang, CFA
Don’t give into despair, make a game plan
Get My Guide

--- Written by Margaret Yang, Strategist for DailyFX.com

To contact Margaret, use the Comments section below or @margaretyjy on Twitter

DailyFX provides forex news and technical analysis on the trends that influence the global currency markets.

DISCLOSURES