Daily Brief, December 14 – Everything You Need to Know about Gold on Monday!
Arslan Butt • 3 min read
Good morning traders,
Today, during the Asian trading session, the yellow metal prices failed to stop their bearish overnight rally, remaining bearish around the $ 1,835.66 level, mainly due to the risk-on market sentiment. That was witnessed by the positive performance of the S&P 500 Futures. However, the upbeat trading sentiment could be associated with the optimism in the US due to the imminent release of the next stimulus package and the start of vaccinations against the coronavirus, which have ultimately undermined the safe-haven appeal of the precious metal. Apart from this, European Commission (EC) President Ursula von der Leyen and UK PM Boris Johnson have agreed to extend Brexit talks for one more week, favoring the risk-on market sentiment and adding further pressure the safe-haven gold prices.
In contrast, the on-going coronavirus (COVID-19) woes and the tussle between the US and China keep challenging the risk-on mood in the market, which has capped further any downside momentum for bullion. Furthermore, the weakness of the broad-based US dollar could also be considered as one of the key factors that is helping to limit any deeper losses in gold. The yellow metal is currently trading at 1,835.87 and consolidating in a range between 1,834.38 and 1,841.59.
The market trading tone is also being supported due to the optimism over a possible vaccine and treatment for the coronavirus. These hopes were fueled after the US Food and Drug Administration (FDA) officially authorized the Pfizer-BioNTech COVID-19 vaccine for emergency use. In the meantime, hopes were further bolstered by the recent suggestion that White House staff members will be among the first to be vaccinated. However, the positive developments due to the COVID-19 vaccine continue to favor the market risk-on mood and undermine the yellow-metal prices.
Across the pond, the reason for the risk-on market sentiment could also be attributed to a little bit of Brexit progress, which was fueled after European Commission (EC) President Ursula von der Leyen and UK PM Boris Johnson agreed to stretch Brexit talks for one more week.
As a result, the broad-based US dollar failed to gain any positive traction, drawing offers on the day as doubts persist over the global economic recovery from COVID-19. That was witnessed by the downbeat US data last week. Meanwhile, the risk-on market sentiment also weighed on the US currency. On the other hand, the losses in the greenback were further bolstered by the expectations that the Fed will keep interest rates low for an extended period, as was decided at the last policy meeting of 2020. However, the losses in the US dollar helped to limit deeper losses in the GOLD prices, as the price of GOLD is inversely related to the price of the US dollar. By 9:48 PM ET (1:48 AM GMT), the US Dollar Index Futures, which tracks the greenback against a bucket of other currencies, had dropped by 0.17%, to 90.773.
On the contrary, the intensifying market worries regarding the continuous surge in new coronavirus cases in the US and Europe, which keep fueling global economic recovery concerns by imposing new lockdown restrictions on economic and social activities, keep trying to probe the upbeat market performance. Apart from this, the long-lasting inability to pass the US fiscal package, and the fears of a full-fledged trade/political war between the West and China is also challenging the market risk-on mood, which might help to limit the losses in the prices for the yellow-metal.
Moving ahead, the market traders will keep their eyes on the US stimulus headlines and vaccine news. In the meantime, the updates surrounding the Brexit trade talks and the Sino-US tussle have not lost any significance on the day.