GOLDWELL：Daily Market Recap - GOLD

Gold prices are continuing to drop on Monday after having slid nearly 4.5 percent in the previous week. Stronger risk-on trades on the back of an improving economic outlook are fuelling moves away from gold and into higher-yielding assets; a trend which may continue in the coming week.

Recent optimism around the discovery of a covid-19 vaccine has ignited economic sentiment which has shifted investors‘ focus away from safe havens to the detriment of gold. We are noticing increases in copper and oil futures which indicates manufacturing activity should be picking up in the following months. Corroborating this scenario is today’s strong performance in the Chinese manufacturing and services PMIs for November coming in above expectations.

The immediate driver in gold prices in the past months has been geared towards inflation forecasts based on the likelihood of new fiscal or monetary stimulus measures to be undertaken by global central banks. The news of a vaccine has jumbled these plans to inject further cash into the global economy and in turn, reduced buying demand on gold.

(Chart Source: Tradingview 30.11.2020)

Looking ahead, covid-19 vaccine or not, there should be some degree of stimulus needed to keep the economy running into the new year, and for this reason, the US Dollar should continue to feel some pressure, contributing to lift upside potential on gold. The question is now at which point to step back into longing for the precious metal.

Disclaimer: This material has been created for information purposes only. All views expressed in this document are my own and do not necessarily represent the opinions of any entity.