Economic deterioration motivates Gold purchasing


Economic deterioration motivates. Gold purchasing Gold’s price continued to move higher in the past days as in December, the sentiment seems to have changed. 

Since the first day of the month, Gold has made consecutive daily leaps higher, indicating that traders still find a reason for Gold’s price to rise.

Today we will be looking into topics that could move gold’s price in the next days while our technical analysis at the end will provide a complete outlook on the precious metal’s price.

The main driver for Gold’s price in our opinion is the covid-19 outbreak and other matters that currently surround the pandemic. Some of the matters that may interest Gold traders over the covid-19 outbreak are the further plans that governments have to fund sectors and their economies, but also vaccine approvals and distribution around the world. 

Starting first with government plans to boost their economies, currently, we have in focus the US with its stimulus plans still not decided upon. We maintain the opinion that upon agreement or announcement of any stimulus measures, especially in the US, gold traders will most probably take action. 

The most straight forward view on the matter would be that upon announcement of the stimulus package Gold’s price could move higher as a consequence of a weaker USD. However, we must note that the matter remains extremely sensitive for the US economy, as it could perhaps determine its future performance and recovery. 

As we have discussed in the XM Live Advanced Room Session, what will happen with Gold’s price really depends on the size of the new fiscal stimulus package. In any case, Gold’s price volatility is expected to increase substantially. 

On the same matter but a different front, other economies around the world like Japan, the UK and Canada seem to require a further stimulus to support growth. 

Gold traders should be aware that the governments in trouble may turn to physical Gold purchases as the recovery may be extended into the following years. Thus, even though Gold’s price seems to be driven by trading, physical Gold purchases could also be of significant interest and could determine trends. 

In the past days, the U.K. became the first Western country to start distributing a Covid-19 vaccine to its population. A group nearby 6 million people are estimated to be vaccinated as part of the first phase that involves high-risk healthcare staff and older people. 

Please note that currently in the UK they are vaccinated with the shots developed by Pfizer Inc. and Germany’s BioNTech SE. During the past week, a report by Reuters stated that Pfizer was forced to reduce its 2020 production target, as the pharmaceutical company faced challenges with its raw materials supply chain.

Although many companies like Moderna and AstraZeneca have produced their own vaccines, many countries around the world already depend on Pfizer for shots. So at the moment, millions of people depend on these pharmaceuticals companies and their activities, which could be supporting Gold’s price as a form of risk hedging. 

As a final note, we would like to highlight the uncertainty as we enter the final period before the holidays. Peoples willing to travel and be with their families or even leave the house for personal reasons could contribute to a large spread of the virus. Signs of increased cases and deaths around the world are already evident; thus if governments impose further lockdowns, more economic uncertainty could prevail. In this case, Gold’s price is most probably to be closely monitored by traders that could be looking to take advantage of further economic deterioration.

The chart says a lot! Key support level 1848 was broken. After the short-term sell-off, the price recovered and rose even above the 1848 level. The question now is if the buyers are managed to support the key level, or they will fail, and the price will drop below the support once again. 

Targets for buyers: 1900, 1920, 1933 and 1965 in further time

Targets for sellers: 1848, 1822 and 1780 as the brave ones.

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