THE VACCINE EFFECT PENALIZES THE PRICE OF GOLD
Encouraging news about coronavirus vaccines has caused markets to react for risky assets. Operators are anticipating an upturn in economic activity, so they are moving towards traditional economic values and away from defensive assets.
Deprived of its safe-haven appeal by the good news on the vaccine front, the price of gold is losing ground and is trying to find support towards its $1,850 support level. Nevertheless, public spending programs and liquidity injections by central banks have traditionally supported the price. As a result, the outlook for the future remains encouraging for all precious metals.
It is also conceivable that the vaccine will provide a favorable context for yellow metal with the return of inflation. The prospect of a rapid recovery and very low rates is conducive to rising inflation. In addition, the greenback is impacted by numerous data, starting with the overbearing monetary policy of the U.S. Federal Reserve. Its depreciation is a determining factor in the evaluation of the gold price. Finally, the gradual return of industrial, jewelry and central bank demand should propel the price of gold to new records.
XAU/USD : A SUPPORT TO MONITOR
The price of gold has been on the rise since the announcement of the future vaccines, but the momentum remains bullish in the long term. On this graph, it is clear that prices are once again testing the support level at $1,852. The real risk would be an incursion below threshold, we could see a deeper plunge to the next zone coupled with the 200-period moving average around $1,800. A return to this level would offer a possible opportunity to position the asset in the direction of the trend.
For now, as long as the $1,850 does not give way under selling pressure, the market continues to consolidate within a range (in yellow). Thus, a new price rotation towards the $1,960 upper bound is a scenario not to be excluded. However, only the crossing of this key resistance will open the way for a new upward leg to regain the historical highs and spread more evenly.
Source DailyFx
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