Gold Falters, Shrinks 3.5% Year-to-Date
Several fundamentals combine to pump investor confidence. Consequently, instead of channeling funds to haven status like gold, investors move them to relatively risky assets, impacting the yellow metal prices. As of writing, gold prices are sheared as the USD strengthens. This optimism and the current financial environment could see gold prices track lower now that both houses are all blue and Joe Biden is ready to hit the money printers. Still, gold prices may be priced in, and expected tailwinds throttled—coronavirus is yet to be fully contained. Governments are, therefore, considering debasing even more for economic reasons, diluting impacting gold.
Apparently, gold prices are down as candlestick arrangement points at. However, from an optimistic perspective, it could be because prices leapt too fast, and this correction is inevitable, considering its deviation from technical indicators like moving averages and others. There is a marked deviation at spot rates. If the USD is brought into the picture, there is enough reason to suggest a possible repricing to the lower side even if fundamentals like increasing debt and a low-interest-rate environment remain as it is. Ordinarily, these would have impacted the USD and pumped gold. The opposite may happen in the medium term thanks to confidence in the United States economy and vaccines. Rising bond yields—gold is non-interest bearing—for now, would therefore play a big part in chopping gold prices lower, concurrently offering support for the greenback.
Impact on gold prices:
Bearish. In the short-term, gold prices may suffer primarily because of stronger risk appetite from investors who contend with mediocre—or low yields due to coronavirus. This liquidation may dampen gold bulls, but prices may recover in the medium term as inflation rises due to continued fiat debasement.
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