Daily Market Recap - GOLD Sets Multi Months Lows

Gold took a turn for the worse on Monday, breaking through the critical 1,850 per ounce level on the back of a stronger US Dollar driven by upbeat PMI figures and an announcement by US Treasury Secretary Steven Mnuchin that he will not be extending the Federals Reserves key pandemic lending program after the end of December.

The US Markit manufacturing and services PMI for November came in higher than expected at 56.7 and 57.7 respectively. The data published revealed that private sector business activity in the US expanded at an impressive pace in November, furthering the risk-on sentiment in the market and in turn weighing on golds appeal.

Furthermore, in light of the recent upbeat mood amongst traders, Wall Streets main indices are kicking off the week on a solid footing with the Dow Jones up 1.12 percent at the time of writing. Meanwhile, US treasury yields continue to widen with investors seemingly keen on ditching the safe havens for riskier assets.

US Treasury Secretary Mnuchin issued a letter on Thursday in which he outlined his decision to not extend several of the Feds emergency funding programs. The Fed questioned this move commenting that it would prefer to have a full suite of solutions available to them to continue to safeguard the American economy against the covid-19 pandemic.

Considering the points above, the outlook in gold seems to point towards a further drop in value in the coming sessions. The supporting factors of increased fiscal stimulus and a weakening economy have been cast aside with the attention now directed towards a strong recovery in the market rallying around optimism on a rapid roll-out of a covid-19 vaccine.

(Chart Source: Tradingview 23.11.2020)

From a technical perspective, gold has breached an important support level around the 1,850 marks and has opened the door for sellers to push for a test of the 1,815 level, the pivotal point before the August rally. The momentum is sliding firmly in favor of bears though it is likely that we may see a recovery around the 1,815 marks as value hunters should return into the market come that point. On the flipside, buyers will be eyeing the 1,850 as a medium-term target the likely short-run range falling between the 1,850 and 1,815 levels.

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.