Daily Brief, November 11 – Everything You Need to Know About Gold on Wednesday!
Arslan Butt • 2 min read
Good morning traders,
On Wednesday, the precious metal, gold, edged higher, supported by a weaker US dollar. Simultaneously, anxieties about growing numbers of COVID-19 cases in the United States and logistical hurdles over the crowd roll-out of a possible vaccine further helped the yellow metal’s appeal. Previously, on Tuesday, the gold prices dropped more than 5% in a single day, below the 1,900 level, after the news of the first successful late-stage COVID-19 vaccine trials that prevented more than 90% of infections. Prices for the precious metal posted the biggest daily decline in over seven years, as investors started to dump safe-haven bullion and move to riskier assets. The reason behind this was the potential recovery of the global economy from the pandemic, along with the dimmed hopes for any additional fiscal stimulus.
The equities rose after Pfizer Inc. said that its experimental COVID-19 vaccine was more than 90% effective. Pfizer and its German partner, BioNtech SE, said they expected to seek US. emergency use authorization later this month.
The optimism that the release of a vaccine is imminent may slow or diminish further stimulus measures to support economies damaged by shutdowns, in efforts to stop the spread of the pandemic. The gold price lost all of its US election gains, triggered by the hopes of further stimulus. The precious metal reversed after the optimism triggered by the vaccine news and as the hopes of further stimulus faded away.
Cleveland Federal Reserve Bank President Loretta Mester said that the emergency lending programs set up by the Fed during the coronavirus pandemic had eased distress in financial markets, and they are still needed. Mester also said that Fed Chair Jerome Powell would be working with the Treasury Department to determine whether the programs should be extended beyond the end of the year. She added that the Fed is not out of ammunition when it comes to stimulating the economy. It could provide more assistance by adjusting its asset purchase program and implementing other tools.
She stated that the economy had rebounded more strongly than expected, but gains have not been evenly spread. Despite the optimistic news from Pfizer and BioNtech on Monday, regarding their coronavirus vaccine, Mester said that she thinks economic growth will be slower going forward. The gold prices kept moving in a downward direction on Monday, following Mester’s comments, plunging to its lowest level since August.
Today, the fundamental side may not offer us any high-impact economic event; the market is likely to show choppy sessions amid Bank holidays in the Eurozone, Canada, and the US.
Daily Technical Levels
Pivot Point: 1,894.82
The precious metal, gold, has entered the oversold zone after falling nearly 5% within a single day. Currently, gold is trading above the 1,850 level, which is extending its immediate support now. On the higher side, gold may find the next resistance at around 1,894, which marks the 38.2% Fibonacci retracement level. Continuation of a bullish trend may drive further bullish movement in gold, until the 50% Fibonacci retracement level, at the 1,908 mark. Good luck!