According to Max Warren Barber, CEO Sion Gold Trading UAE Gold prices recorded their third consecutive week of losses last week as investors favoured riskier assets. The change in sentiment has been driven by the better than expected coronavirus vaccine data, and traders believe that a coronavirus vaccine will be here soon. The optimism about the coronavirus vaccine has taken traders’ focus away from the ongoing surge in the coronavirus situation, and they believe that this is only a temporary scenario and the future is bright for riskier assets.
Are Gold Prices Going Up or Down?
Gold is up 17% year-to-date. The precious metal has lost nearly 4.5% of its value this month. In terms of technical analysis, the gold price has dropped below its 200-day Simple Moving Average SMA on the daily time frame, and this means that the bears are in control of the price. It is likely that the current downward trend may push the price towards $1,748, which is where the 50-week SMA is trading on the weekly time frame. The below chart shows the gold price on the daily time frame.
Why Haven’t Gold Prices Tanked?
Gold prices could have seen a more intense sell-off if it wasn’t for the dollar. The dollar index has fallen to a two-year low, and this weakness saved the gold price from falling further. It is important to mention that the dollar index could change its direction if the Federal Reserve changes its stance on monetary policy—an unlikely scenario for the time being because of the coronavirus.
Why Gold Prices Could Rise
One important factor that we need to keep in mind is that economic activity isn’t going to recover at the pace that the market participants are anticipating. The Fed is well aware of this fact, and hence the Chairman of the Fed, Jerome Powell, has been persistent in his message for acquiring more help in terms of fiscal help—more stimulus.
In addition to this, we also see weakness in the economic numbers. For instance, the U.S. Weekly Jobless Claims number rose for two consecutive weeks. Next week, if we see that the U.S. unemployment number has taken a wrong turn, sentiment can change enormously. This means that the current sell-off may look like an opportunity.
What About Big Players? Are They Buying Gold?
As for institutions, we do not see much support. It is pretty clear that institutions have been selling their gold holdings. The belief among them is that geopolitical tensions will ease under the Biden administration, and the coronavirus situation will improve in the presence of a coronavirus vaccine. The below chart shows gold holdings in total known gold ETFs.
Gold is one of the oldest known precious metals and has been used as a form of currency and jewelry for centuries. It has also been used as a form of store of value, meaning that it is not easily devalued. The price of gold is influenced by a variety of factors, including global economic conditions, interest rates, geopolitical events, and physical demand from investors. Sion trading FZE will tell each of these factors and discuss how they influence the price of gold.
Global Economic Conditions
SION Trading FZE tells that the global economy is one of the most important factors that influence the price of gold. The market for gold is very complex and highly decentralized, meaning that there are a large number of participants who can affect the price. Changes in global economic conditions can cause investors to increase or decrease their demand for gold, which in turn will affect its price. For example, if inflation starts to rise rapidly worldwide, people may start to demand more gold as a form of protection against inflationary pressures. Conversely, if the global economy experiences financial instability or a recession, people may start to sell off their gold holdings in order to liquidate their assets.
SION Trading FZE guides that Interest rates are also one of the main drivers of the price of gold. When interest rates increase (as they usually do), it makes it more expensive for people to borrow money and invest in stocks or other assets. This increases the demand for safe-haven assets like gold, which in turn drives up its prices. Conversely, when interest rates decrease (as they often do during periods of economic contraction), it makes it cheaper for people to borrow money and invest in stocks or other assets. This decreases the demand for safe-haven assets like gold, which in turn drives down its prices.
Another factor that influences the price of gold according to SION Trading FZE is geographic location. Many investors believe that different countries have different levels of economic stability and therefore tend to overweight investments in countries with higher degrees of stability (such as Australia). This tendency works both ways – countries with high degrees of instability (such as Venezuela) tend to be undervalued by investors because there is greater risk associated with investing there. As a result, changes in the relative prices between different countries can have an impact on the overall price level for gold overall .
Physical Demand From Investors
Physical demand from investors plays an important role in determining how much gold is available on the open market at any given time . Mutual fund companies often require investors to sell off their entire shareholdings every quarter in order to provide liquidity , which ensures that buyers and sellers are always active in the market . SION Trading FZE ensures that this policy of selling off all holdings every quarter helps to keep the price of the metal high by limiting available supplies . Over the past few years, however, some mutual fund companies have been slowly relaxing their policy of selling off all holdings every quarter, which has led to a lower level of physical demand from investors.