Yahoo Finance Price of Gold Fundamental Daily Forecast – Long-Term Buyers May See Value at $1790.50 to $1705.20
Long liquidation continued to pressure gold prices on Monday as investors threw more money at riskier assets including copper which hit a seven-year high and Bitcoin, which reached an all-time high earlier today.
Let’s not all blame the vaccine on gold’s dismal performance in November, or Joe Biden’s transition into the White House. On Monday, gold posted a fourth consecutive monthly loss. It may have been crushed last week, but the selling began way back in August when the coronavirus numbers were much better in the United States and Europe.
Gold reached its high for the year in early August a week after the U.S. federal government’s emergency employment insurance ran out. That tells me that the lack of fiscal stimulus is behind the current selling pressure.
The failure by the Democrats and Republicans to reach another stimulus deal before the election contributed to the decline. Trump’s refusal to concede kept Congress occupied enough to postpone negotiations after the election.
What other choice did speculators have if the stars weren’t lining up right for the next bullish wave in gold than to move their money into cryptocurrencies and industrial metals?
I wouldn’t call gold “dead”. It still has life and we should know in about two weeks how much life it has when the European Central Bank (ECB) and the U.S. Federal Reserve reveal their latest stimulus plans.
The way I see it, gold traders are looking for a value area. The current move is similar to what took place in the crude oil market about a month ago. Gold is currently testing 50% to 61.8% of its rally from March to August. A correction into this zone is quite normal.
What we’ve seen is the proverbial “shaking of the trees” to get the short-term speculators out of the market. They were the ones holding prices at levels that were unattractive to the longer-term investors. Now that they are out of the way, the longer-term bulls can re-enter at more favorable prices.
And the longer-term buyers will get some help from the ECB and Fed. Furthermore, the central banks are still going to have to print money to keep the economic recovery intact. This is a bullish sign to me.
Don’t get me wrong, the gold market needs the short-term buyers. The professionals buy gold when nobody wants it and they accumulate it, helping to form a support base. That’s what I’m counting on at $1780.50 to $1705.20.
Once the support base is formed, the short-term buyers will chase the momentum on the breakout. This will drive prices higher. At least that’s the plan. We still need a catalyst to drive the market higher over the short-run and we’re counting on a new stimulus package shortly after Biden’s is sworn into office on January 20. Hopefully, Congress will renew negotiations in mid-December.
For a look at all of today’s economic events, check out our economic calendar.
This article was originally posted on FX Empire
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