Daily Brief, Feb 01 – Everything You Need to Know About Gold on Monday!

GOLD prices closed at 1,847.96, after placing a high of 1,875.60, and a low of 1,839.46. After placing losses for 3 consecutive sessions, GOLD rose on Friday. The gold price peaked on Jan 08; however, the advances were short-lived, and GOLD reversed its direction in the late trading hours of Friday, losing most of its daily gains.

The sudden surge in the yellow metal on Friday was caused by the rising speculation in the stock market, which helped raise the demand for safe-haven assets. The risk-off market sentiment was also supported by the lower-than-expected efficacy of the coronavirus vaccine. The main US equity indices were on course for their worst week since the end of October, amid heightened volatility, which was spurred by speculative trading on the part of retail investors. On Friday, the hot stocks, namely GameStop, Koss and AMC Entertainment, rallied in premarket trading, after a popular site, Robinhood, said that it would allow limited buying. The speculations of the retail investors frightened market traders and caused a sharp fall in US stocks on Friday.

The Dow Jones Industrial Average lost 2%, closing below the 30,000 mark for the first time since Dec 14. The S&P 500 fell by 1.9%, and NASDAQ dropped by 2%. The decline in US stocks helped raise the demand for GOLD, and the precious metal surged to its highest level since Jan 08 on Friday. Furthermore, Johnson & Johnson said on Friday that, in a large global trial against multiple variants, its single dose vaccine was 66% effective in preventing the coronavirus. The data showed that the vaccine was 72% effective in the United States, but the efficacy was only 57% in South Africa. where a worrying variant is spreading.

The company previously claimed that their vaccine would provide full protection against the virus in only a single dose, but as the data suggests, at just 72% efficacy, the vaccine has somehow failed to meet the market expectations. This news added to the risk-off market sentiment, rather than giving hopes of another weapon to tackle the pandemic. The risk-off market sentiment then continued supporting GOLD, pushing its prices higher on Friday.

A leading coronavirus vaccine scientist who helped develop Moderna’s highly effective vaccine, said on Friday that Johnson & Johnson’s new trial results that tout 72% efficacy for the one-shot vaccine in the US look “darn good”. He added that we should not let the ‘perfect’ get in the way of the ‘good enough’, as the results were very good for a single dose.

The new vaccine from J&J happens to be cheaper, and what’s more, it is easier to manufacture and store, and quicker to administer than Pfizer and Moderna’s options. These comments restored the hopes of economic recovery in the market. They supported the risk-on market sentiment, ultimately putting pressure on the GOLD prices, causing them to lose most of their daily gains on Friday. However, the gains in the yellow metal started to reverse direction during the late trading hours on Friday, as the US dollar started to gather strength after the release of strong macroeconomic data.

On the data front, at 18:30 GMT, the Core PCE Price Index for December came in, showing an increase to 0.3%, against the expected 0.1%, supporting the greenback and capping any further gains in the yellow metal. The Employment Cost Index for the quarter also rose, coming in at 0.7%, against the expectations of 0.5%, which boosted the US dollar and limited the rise in the precious metal. The Personal Income for December also increased, reaching 0.6%, compared to the expected 0.1%, which also lent strength to the US dollar.
In December, personal spending declined to -0.2%, against the expected -0.4%, which supported the US dollar and capped any further gains in gold prices. At 19:45 GMT, the Chicago PMI in the US for the month of January came in, showing a rise to 63.8 against the expected 58.4, which boosted the US dollar. At 20:00 GMT, the Pending Home Sales figures for December were released, indicating a decline to -0.3%, against the expected -0.5%. This supported the US dollar, and caused the yellow metal to lose its daily gains. The Revised UoM Consumer Sentiment in January were in line with the expectations of 79.0. The Revised UoM Inflation Expectations for January also remained flat, on a par with the previous 3.0%. Meanwhile, investors will continue to focus on the passing of President Joe Biden’s $1.9 trillion coronavirus relief bill through Congress, as some of the Republican lawmakers are questioning the size of the package.

Daily Technical Levels
Support               Resistance
1,828.86             1,860.26
1,816.53              1,879.33
1,797.46              1,891.66
Pivot Point:        1 847.93

On Monday, the precious metal, GOLD, continues to trades sideways, holding below 1,862, and it’s looking to violate the resistance level of 1,865. Above this, GOLD could continue its bullish trading until the next target levels of 1,876 and 1,899, while support continues to hold at around 1,857 and 1,841. A bullish bias dominates. Good luck!