Daily Market Recap - GOLD In Freefall?

Gold prices slid spectacularly at the end of the trading week plummeting through multiple support levels before settling around the 1,848 marks, down over 3 percent for the day.

The metal was under pressure on Friday after US treasury yields continued to push higher as was the pattern throughout the week. The yield on the 30-year Bill is now close to 2 percent, nearing levels seen before the covid-19 pandemic, rendering the non-interest-bearing gold less attractive to hold at the moment.

Gold appears to be having a fundamental shift with investors leaving the metal behind and looking more towards the Treasuries in a way to conserve wealth while also gaining some stable return on investment. We will likely continue to experience strong swings in the Treasury market in the coming days.

Another event taking the wind out of the sails for gold has been the acceptance by President Trump to have an orderly transition of power come January 20th. The incumbent Trump has half-heartedly taken this decision as evidenced by his refusal to take part in the inauguration ceremony. Analysts point to the reduction in uncertainty fuelling some profit-taking amongst gold traders.

From a technical perspective, momentum in gold is tilted in favor of the bears, with the next downside target set at 1,800. Should prices continue to move lower, we will eventually get indications on the true value of the yellow metal thanks to this break. We can expect value buying to kick back in below the 1,800 marks as long term added stimulus measures should come back into play and support gold prices.

(Chart Source: Tradingview 10.01.2021)

Short-term speculators may capitalize on some follow-through selling in the market in the coming days, however, the more coherent strategy, in the long run, will be to buy into the dips and sell the rallies. For now, traders may content themselves to short the metal above the 1,848 level and step back into long positions closer to the 1,800 level.

Support & Resistance Levels:

R3 1,962.94

R2 1,908.94

R1 1,875.53

S1 1,821.53

S2 1,800.00

S3 1,783.09

Disclaimer: This material has been created for information purposes only. All views expressed in this document are my own and do not necessarily represent the opinions of any entity.