The gold market started this trading week off on the right foot, adding nearly $30 per ounce for the session. The buying was likely based on a slight increase in global risk aversion as well as some positivity on the daily chart.
The stress of the ongoing COVID-19 pandemic continues to wreak havoc on the healthcare system as more than 100,000 have now been hospitalized in the U.S. due to the virus. Although hopes for a vaccine have likely led to some buying in equities in recent weeks, the vaccine is not likely to be distributed on a widespread basis for some time yet. It could still be many months before the vaccine is made available to the general public. That fact, along with the upcoming holidays, could make for some very rocky times ahead. Some have suggested the worst of the pandemi8c is still yet to come, and with many people wanting and even planning to get together over the holidays, American hospitals could see a massive influx of cases in the weeks approaching.
In addition to the ongoing viral pandemic, markets are also worried over the possibility of additional U.S. sanctions against China. The U.S. is reportedly ready to slap sanctions on some Chinese officials in response to China’s crackdown on Hong Kong protestors. Any further sanctions could invite a response from China, and the global trade scenario could take a rapid and significant turn for the worse if the globe’s first and second-largest economies continue their war over trade. As if the global trade situation was not enough, investors are also becoming increasingly worried over Brexit, as chances of a no-deal Brexit appear to be on the rise.
On the other hand of all of this, U.S. lawmakers appear to be making solid progress on another stimulus plan that could total nearly $1 trillion. In another sign of economic positivity, the Chinese economy has continued to impress. The nation reported their largest rise in exports for several years and has apparently overcome the virus more rapidly than the U.S. The strong Chinese economy could potentially keep demand for gold bullion on the rise and may even keep the global economy out of recession if all remains equal.
The U.S. Dollar has also been a major catalyst for gold prices and the Dollar Index saw a bit of a bounce today. After hitting a 2.5-year low last week. Further dollar weakness could keep the gold and metals markets from moving much lower while maintaining a bullish bias over the long-term. Current U.S. monetary policy may keep the dollar on the defensive and the greenback could see a significant decline if long-term support on the chart fails.
Today’s outside-day up has leveled the playing field between market bulls and bears. If the bulls are able to maintain recent momentum, they could look to challenge the $1900 level. If the bears begin to take control again, however, the market could potentially sink towards the $1800 level. A breakdown below this area would inflict significant chart damage and could even lead to a reversal in the long-term trend.