Gold breaks below 1,850 USD – what’s going on here?
Source: Economic Events November 25, 2020 - Admiral Markets Forex Calendar
Gold continues to underperform and signs are intensifying that we are probably not yet done on the downside. The near-term break to below 1,850 USD technically points to further weakness ahead.
While the US-Dollar and 10-year US yields have both given back nearly all of their "vaccine hope gains" initiated on the 09th of November by the Pfizer and Biontech news, Gold couldn't even recapture the 1,900 USD mark, instead breaking below the important support around 1,850 USD
In fact, technically, a push back above 1,900 USD is crucial to neutralize the picture again. Below that level chances are increasingly high that Gold bears will continue to push the yellow metal lower, making a run below 1,800 USD likely.
What could be positive for Gold is that we are currently entering a bullish seasonal window in the yellow metal, dampening the bearish outlook. But, what's certainly of higher interest is who is currently selling Gold.
Indeed, we are still of the opinion that market participants will soon realize that a vaccine, alone, won't cut it and that we are still far away from returning to "normal", especially from an economic standpoint.
That in mind, chances are high that massive fiscal packages to stabilize the global economy from the US government and European countries as well, after the recent lockdowns are inevitable. In addition, an ultra-dovish approach from central banks around the globe, especially from the FED, to finance that "fresh" debt is also inevitable.
That said, the current developments and the price drop in Gold have something to do with the expiration at the Comex on Tuesday and several market players trying to push (Paper-)Gold lower to press those traders out of the market who are looking for physical delivery.
But this is currently only pure speculation: technically, a break below in Gold could trigger a next wave lower and activate a target around 1,750/760 USD, while a near-term push back above 1,900 USD could at least result in an attack on the region around 1,920/30 USD:
Source: Admiral Markets MT5 with MT5SE Add-on Gold Daily chart (from July 10, 2019, to November 24, 2020). Accessed: November 24, 2020, at 10:00 PM GMT. Please note: Past performance is not a reliable indicator of future results, or future performance.
In 2015, the value of Gold fell by 10.4%, in 2016, it increased by 8.1%, in 2017, it increased by 13.1%, in 2018, it fell by 1.6%, and in 2019, it increased by 18.9%, meaning that in five years, it was up by 28%.
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