Daily Brief, Jan 01 – Everything You Need to Know About Gold Today! 

Good morning traders,

Team FXleaders wishes you a very Happy New Year. The markets are closed today; however, let’s take a look at the fundamentals of gold. 

 GOLD prices closed at 1,893.62, after placing a high of 1,900.35, and a low of 1,885.25. Gold prices remained steady throughout the last day of the year but were on track for their best year in a decade. The year proved supportive of the yellow metal, due to the economic uncertainty and the massive stimulus measures from governments worldwide, to lessen the impact of the coronavirus pandemic. Gold prices have risen about 48% so far this year, as global central banks and governments delivered economic stimuli that paved the way for higher inflation and currency debasement.

The US Federal Reserve has promised to remain extraordinarily accommodative through 2022, as the increasingly progressive Democratic Party will look for aggressive borrowing and spending, in contrast to the current ruling party under Donald Trump. If this scenario comes true, then the US dollar will remain weak for a long time; however, if the vaccine rally is effective and the pandemic is under control by summer, it could limit the rise in gold prices. The non-yielding yellow metal is used as a hedge against the inflation that is likely to result from record fiscal stimuli and ultra-dovish monetary policies.

On the data front, at 18:30 GMT, the Unemployment Claims from the last week of 2020 declined to 787K, against the projected 832K, supporting the US dollar and ultimately capping any further gains in the prices of the yellow metal.

On New Year’s Eve, the GOLD prices remained under pressure, as the hopes about an increase in US stimulus checks faded away, lending strength to the US dollar. The rise in the demand for the greenback reversed the upward trend in gold on Thursday, and the prices dropped, resulting in a steady movement for the day.

As part of the recently passed coronavirus relief bill, the Trump administration has begun sending stimulus payments of up to $ 600 each to millions of Americans. This was the second such direct payment to Americans, amid historic unemployment levels and business closures.

Donald Trump has requested that the direct payment checks be increased from $ 600 to $ 2,000 – a move which was backed by the Democrats – and the bill is now waiting for Senate approval. On Tuesday, Senate Majority Leader Mitch McConnell blocked Senate Minority Leader Chuck Schumer’s attempt to unanimously pass a bill that would increase the direct payments to $ 2,000.

On the other hand, the gold prices ended 2020 25% higher, making this year the best since 2010. The weakness of the US dollar has been the major driver of the gold prices this year, with the greenback at its lowest level in almost three years, amid near-zero interest rates in the US and US federal debt extension into the trillions, and Congress issuing two relief packages for the coronavirus pandemic. 

Meanwhile, the gold prices also remained under pressure on Thursday, due to another vaccine rollout in Great Britain. The UK regulatory authority passed the emergency-use authorization of a vaccine developed by AstraZeneca and Oxford University. Another vaccine means we are one step closer to global economic recovery and hence, to an improved risk sentiment in the market, which weighed on gold prices on the last day of 2020. Good luck!