Spot gold dropped as much as 0.7% to $1,836.30 an ounce at the Asian trading session
Gold extended its largest drop in two months amid a strong dollar, as metal traders weigh President-elect Joe Biden’s pledge on his strategy in helping the world’s largest economy.
Spot gold dropped as much as 0.7% to $1,836.30 an ounce at the Asian trading session.
What this means: The rebound seen lately in the U.S dollar has helped diminish appetite for the precious metal with the U.S dollar rising, as global investors move from stocks to the more risk-averse asset. A stronger U.S dollar makes the yellow metal more expensive for holders in other major currencies.
Gold’s previous gains in Q4 2020 are getting overturned as a surge in U.S Treasury yields soften the appeal of the non-interest-bearing asset (gold).
Also, as COVID-19 vaccines get rolled out, global investors are weighing up the safe haven’s asset prospects for this year, amid reports that more massive support is on the way, which could help gold bugs in keeping prices above $1,850/ounce.
Stephen Innes, Chief Global Market Strategist at Axi, in an explanatory note to Nairametrics hinted at the fundamentals weighing hard on the precious metal;
“The US dollar’s recent gains, higher yields, and the equities rally is keeping gold on the defensive.
“The gold market spends most of Friday aggressively trimming longs with little support down until $1825/oz.
“Naturally, stop-loss selling on the way down as buying interest from the real money community has lacked in any meaningful way this year which runs counter to seasonal norms.”
Bottom line: The sell set-up from a technical and fundamental perspective hit gold like a ton of bricks at its last trading session when the yellow metal sliced like a hot knife through butter at the $1900 support level.
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