Gold rebounds off a 5 month low

Gold continues to ride the bearish momentum it has been in since the past week, with traders somewhat intensifying their sell positions in the latest days. As we now move into the last month of the current year most traders could be more interested in events that could support a reversal for Gold’s price. In this report we will be looking into some important factors that are currently driving the Gold market.

First we must note that November has been a very active month for Gold and its activity can be broken down so we can identify what matters gold traders find enticing. During the first week of the month, Gold was on the rise mostly supported by developments in the political stage in the US. Gold traders were especially interested in the US elections and the uncertainty they brought to the table. The bulls were in charge for the first week and seemed to be willing to continue possibly as Donald Trump still had a chance for the US presidency. However, as votes reeled in and Biden received most them, Gold begun its selling momentum. This may have occurred as Joe Biden seemed much more relaxed compared to Trump’s aggressive and sometimes rigid stance which may have intensified market worries over his possible reelection. In the third and fourth weeks of November more headlines regarding the possibility of an effective vaccine came in, that supported and extended the selling momentum for Gold. Vaccine news seems to excite traders as until now it has forced a risk on attitude with most money flowing out of the Gold market and into other volatile instruments.

This was also the case yesterday the 30th of November with news from U.S. Biotech Company Moderna seeking approval to release its vaccine for public use in the near future. This will be the second vaccine accepted for public use as Pfizer has already requested clearance for its own vaccine. In our view, the more vaccines available to the public, the more chances of an easing of both health and economic risk could occur. However, if the vaccines are actually cleared for public use, their performance will be closely monitored and criticized by the public and authorities. Due to the fact such vaccines usually require years of testing to be approved the risk of failure or the possibility of side effects can also pose a threat to users, the economy and the world. Gold traders are most probably to respond accordingly to both positive and negative news on vaccine usage.

We now move to the performance of the global economy and its impact on Gold’s price. In the largest economies of the world the US and China, recent economic data could be worth noting for Gold traders.

Manufacturing and Services activities have risen in the latest months. Also GDP 3Q figures have also improved while some have even moved from negative to positive territory which displays impressive recovery signs. The fact that the US and China economies are slowly improving may be supporting the idea that economies in Europe or Asia are also on their way to rebound. For this reason Gold could follow up on the selling momentum at the moment, as traders see economic risk possibly dampening.

As a conclusion, November was a very strong month for the gold bears as during the entire month the precious metal has lost over 160 USD in value. Even though the Gold market remains oversold for the time being, we do not support the notion that this will set the tone for December. The pandemic is still a great threat for the global economy, especially as we get closer to the holidays season and lockdown measures could possibly ease thus spreading of the virus could prevail. Finally, Gold traders should be aware of the US employment report coming up on Friday the 4th of December that could produce extensive market moving effects for the financial markets and the precious metal.

기술적 분석

Gold is currently trading nearby the 1800 round number level as it bounced off our (S1) 1775 support level yesterday. If the rebound is to continue then the 1820 (R1) resistance level could come into play first, as it was tested but not breached on the 25th and the 26th of November. Even higher our next possible stops could be the 1850 (R2) line and the 1890 (R3) hurdle. As per our support levels, the 1775 (S1) support level could come into play first as it was engaged to the downside in the past two days but not clearly surpassed. Even lower the 1750 (S2) hurdle is also possible while an extended selling run could send the precious metal down to the 1720 (S3) barrier. Please note that with its latest drop Gold has fallen to a 5 month low and the trend is currently downwards. We would suggest that the extensive selling could lead to some profit taking that may support the bulls temporarily.

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