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Financial news agency FX168 (Hong Kong) reported that the price of gold has fluctuated sharply this week. News related to the US economic stimulus once pushed the price of gold to break the $ 1,900 / ounce mark. ; However, news of the new corona virus mutation in the UK caused the dollar to rise sharply and the price of gold fell to $ 1,850 an ounce. However, the price of gold subsequently bottomed out and rebounded, closing at slightly below $ 1,880 an ounce this week. Next week, investors will pay attention to whether US President Trump signs a stimulus plan. Furthermore, investors will also be keeping an eye on the progress of the new mutated coronavirus.
Spot gold this week closed at $ 1,878.52 per ounce. The highest price of gold this week reached US $ 1,906.72 per ounce and the lowest price reached US $ 1,854.60 per ounce.
U.S. Congress Passes Fiscal Stimulus Bill Trump Has Not Yet Signed
Late on the night of December 21 local time, the two houses of Congress approved a spending package of approximately $ 2.3 trillion in response to the new corona pneumonia epidemic. This bill is one of the largest bills passed in the history of the United States Congress, including a total of approximately $ 900 billion in the epidemic economic aid bill and $ 1.4 trillion. of US dollars in the fiscal year 2021 budget bill.
Spurred on by the news, the price of gold rose above $ 1,900 per ounce earlier this week, which is also this week’s high.
However, US President Trump issued a threat on December 22 local time that he might not sign the latest $ 900 billion crown bailout bill passed by the US Congress. Trump said he would require Congress to “modify and improve” the bill’s content, increase the number of stimulus checks and eliminate wasteful spending.
Trump declared that he would ask Congress to amend the new $ 900 billion crown bailout bill, and said it includes too much foreign aid and not enough aid for Americans in difficult circumstances. Trump asked members of Congress to increase the number of stimulus checks that most Americans can receive from a “ridiculously low” $ 600 to $ 2,000, or $ 4,000 for a couple.
The negative evolution of the US fiscal stimulus plan exerted some downward pressure on the price of gold, which after exceeding $ 1,900 an ounce, fell back, approaching the level of $ 1,850 an ounce.
(Source of daily spot gold chart: FX168)
After Trump threatened to oppose the $ 2 trillion federal funding and epidemic aid bill, Democrats took steps to try to increase the number of stimulus controls. House Speaker Pelosi (Nancy Pelosi) expressed her support for Trump’s proposal and called on Democrats to support the proposal. Democrats in the House of Representatives tried to pass a new proposal at the formal meeting on December 24, increasing the distribution from $ 600 per person to $ 2,000 per person, but the proposal was rejected by Republicans.
Pelosi said that on December 28 she will reconvene members of the House of Representatives to vote on the $ 2,000-per-person proposal. If President Trump is firm, he should ask Republicans not to oppose the proposal.
Pelosi said: “Democrats in the House and Senate have sought to increase the amount of the check several times, but Republicans in both houses have repeatedly blocked it. Before, when we negotiated, they said that the amount of the check could not exceed the $ 600. Now they are blocking the vote. If the president is serious about the direct payment of $ 2,000 and must ask the Republicans in the House to end the obstruction of the proposal. “
Although the fate of the US fiscal stimulus plan remains unresolved, investors are still hoping that the economic stimulus bill will eventually become law and thus the price of gold will bottom out.
Adam Crisafulli of Vital Knowledge stated in a briefing: “ The market will not care too much about Trump’s criticism of the stimulus bill, because a formal veto and (and) the stimulus / budget bill are considered unlikely. set is among the audience. The court approved with a majority of votes that will not be rejected. Even if Trump successfully vetoed the bill, Biden will become president in 27 days and can be signed at that time. “
Giovanni Staunovo, an analyst at UBS, said: “Investors are quite optimistic about fiscal and monetary support from governments around the world.” Gold is considered a tool to protect against inflation and currency devaluation. With the help of large-scale stimulus measures, gold rose this year. By more than 23%.
Raymond James analyst Ed Mills said: “President Trump has called for amendments to the Coronavirus Relief Act to increase the amount of personal payments to $ 2,000. This has greatly increased uncertainty in the coming days, but our situation basic remains that Congress The approved bill will become law. “
Natixis analyst Bernard Dahdah said: “Even if Trump refuses to sign the bill, the market generally expects Biden to pass the bill, so we don’t think there will be any downside to the price of gold in this moment”.
Mumbai commodities analyst Anand Rathi Shares Jigar Trivedi said: “The market expects the stimulus plan to be approved, which should support the price of gold.”
Edward Moya, Senior Market Analyst at OANDA, said: “The economic data only strengthens people’s belief that the economy is slowing down, which should help the negotiations on stimulus measures … It is very likely that hit some kind of stimulus package. The dollar is small. Weakness drives up gold prices. “
British mutant virus stirs the market
News of the British mutant virus sent the US dollar index sharply higher earlier this week, once it passed the 91 mark. A stronger dollar is the main reason why gold prices have fallen from their highs.
On December 22 local time, the World Health Organization (WHO) published relevant information about the new mutated coronavirus reported in the United Kingdom. On December 14, the UK informed the WHO that a new variant of the novel coronavirus was discovered by viral gene sequencing. Preliminary analysis shows that this variant is more likely to be transmitted from person to person, with an estimated increase in infectivity of 40% to 70% and an increase in transmission rate of 0.4 between 1.5 and 1.7 .
On December 23 local time, British Health Secretary Matt Hancock (Matt Hancock) stated that following the earlier discovery of a new mutated coronavirus, another new mutated coronavirus was discovered in the UK. The new mutated virus is “very worrying” because it is spreading more and appears to have a deeper degree of mutation than the previous mutated virus. British experts are taking a deep look. The level of prevention and control of the new corona epidemic in more areas of the east and south-east of England will be raised to the highest level 4.
Following the discovery of the new strain of the novel coronavirus in the UK, flights from the UK to Spain, India and Hong Kong have been suspended, and more than 40 countries around the world have imposed UK entry bans.
On December 22 local time, the US Centers for Disease Control and Prevention (CDC) declared that the new mutated coronavirus, which was first discovered in the UK, may have spread in the US. The CDC said in a statement: “Given the continued travel between the UK and the US, and the high prevalence of this mutated virus in the current UK coronavirus infection, it is the new mutated coronavirus is very likely to have spread in the United States. “
Currently, Germany, Switzerland, Japan and France have reported cases of COVID-19 infection. The United States began requiring all passengers on flights departing from the United Kingdom to present proof of negative results for the new coronavirus before boarding.
The rapid spread of the newly discovered strain of coronavirus in the UK has raised concerns, prompting investors to seek safety in the US dollar, and US dollar-denominated gold has been suppressed.
Suki Cooper, an analyst at Standard Chartered Bank, said: “The strength of the US dollar limits some of the upward mobility of gold prices.”
However, the optimistic expectation that the United States will eventually pass the economic stimulus bill has caused the dollar to fall from its high level, thus promoting a rebound in gold prices.
(Source of USD index daily chart: FX168)
Gold bulls target the 1900 mark next week
Given that Trump has yet to sign a new round of stimulus agreements, whether Trump signs a stimulus package next week will come into the limelight. Furthermore, investors will also pay attention to the news about the new mutated coronavirus in the UK.
The data will be very light next week, investors will pay attention to the US consumer confidence index next Tuesday and the pending home sales index next Wednesday.
Gold bulls are still targeting the $ 1,900 / ounce mark next week. From a seasonal perspective, gold tends to perform well in late December and early January.
Hussein Sayed, Chief Market Strategist at FXTM, said: “If asset management companies want to secure some of their earnings and reduce portfolio risk, then gold may receive a large inflow of funds in the final days of 2020. As long as real performance continues in the negative region We remain bullish on gold, which will likely be the case in the next year. ”This is why the price of gold may hit $ 1,900 an ounce next week.
Kitco senior analyst Jim Wyckoff said gold bulls have a short-term technical advantage next week. Wyckoff predicts that the price of gold will encounter resistance at $ 1,900.00 an ounce.
Some analysts expect gold prices to hit new highs next year.
Edward Moya, a senior market analyst at OANDA, told Kitco News that one of the key levels for gold prices next year is $ 2,300. Moya noted that the focus of 2021 will be vaccination, but this will not be the reason why gold prices hit new highs.
Moya said: “Next year will be a very strong year for gold. In the first half of next year, we will continue to see unprecedented fiscal and monetary stimulus measures.” Moya emphasized that inflation is an important issue that deserves attention next year. Investors will be encouraged to turn to safe gold trading.
