20 December 2020
- XAU/USD is consolidating within the $1880s amid conflicting forces.
- Gold prices continue to eye a test of the so-far elusive $1900 mark.
Spot gold (XAU/USD) prices have remained largely rangebound thus far this Friday and have for the most part stuck within $1880-$1890 parameters. On the day, the precious metal trades with minor losses of around $2 or 0.1%.
Gold expected to continue climb above 1900 next week until D1 find High price (Yellow Star) No-Sell is signaled until the Star appear for D1 timeframe
Conflicting forces keeping gold rangebound
It has been a bit of a rollercoaster day for US bond markets, with nominal 10-year yields swinging between 94bps to 92bps and back again, all while 10 year real yields have swung between -102bps and -104bps and back again. Real yields clearly remain at depressed levels, which helps to keep the bid under precious metals like gold, as does rising inflation expectations.
Meanwhile, things have been choppy in US equity markets amid quadruple witching and ahead of the inclusion of Telsa into the index on Monday (that is going to prompt multiple billions in purchases of TSLA stock by S&P 500 index tracker funds). As things stand, the S&P 500 trades around half a percent lower, the Nasdaq 100 trades lower by slightly less and the Dow trades lower by slightly more, which ought to be offering some support to safe-haven gold.
However, spot gold has a negative correlation to the US dollar, which has been on the front foot today. Nothing, in particular, has changed for the US dollar fundamentally speaking (markets still expect a dovish Fed and fiscal stimulus in the new year), so Friday’s move is most likely a result of shorts taking profit/position adjustment on the final day of the week, which, incidentally is the final trading day of the calendar year for many (lucky) market participants who will be taking the rest of the year off to enjoy Christmas with their families.