Gold: After a rebound, have fundamentals changed much?

Spot gold has rebounded by more than 5% from its low near $1,764, but have fundamentals changed much?

Gold 3

On Tuesday, spot gold extended its rebound by 0.4% to a 2-week high of $1,870, as U.S. stimulus hopes lifted market sentiment. Treasury Secretary Steven Mnuchin said he presented a fresh $916 billion economic relief bill to House Speaker Nancy Pelosi, a slightly larger package than the bipartisan proposal of $908 billion.

However, on the other hand, investment demand for gold appears to remain subdued even after a slump in prices. Bloomberg data showed that total known ETF holdings of gold was down 0.8% compared with end-November as of December 8.

In fact, the fundamentals for gold have not altered much, with expectations of roll-out of vaccines and recovery in global economy. Consequently, we might be approaching the limit of expansive fiscal and monetary policy soon.

Source: GAIN Capital, TradingView

The recent rebound may be seen as a technical rebound or short squeezing. On a daily chart, spot gold remains on the downside even though there might be some more room for rebound. It remains trading within a bearish channel drawn from August, and is capped by the declining 50-day moving average. The level at $1,920 may be considered as the nearest resistance, while the 1st and 2nd support are expected to be located at $1,765 and $1,735 respectively.

More from Gold

From time to time, StoneX Financial Pty Ltd (“we”, “our”) website may contain links to other sites and/or resources provided by third parties. These links and/or resources are provided for your information only and we have no control over the contents of those materials, and in no way endorse their content. Any analysis, opinion, commentary or research-based material on our website is for information and educational purposes only and is not, in any circumstances, intended to be an offer, recommendation or solicitation to buy or sell. You should always seek independent advice as to your suitability to speculate in any related markets and your ability to assume the associated risks, if you are at all unsure. No representation or warranty is made, express or implied, that the materials on our website are complete or accurate. We are not under any obligation to update any such material.

As such, we (and/or our associated companies) will not be responsible or liable for any loss or damage incurred by you or any third party arising out of, or in connection with, any use of the information on our website (other than with regards to any duty or liability that we are unable to limit or exclude by law or under the applicable regulatory system) and any such liability is hereby expressly disclaimed.