Gold continues to fall
Gold continues to fall
Gold continues to fall on positive vaccine news, as both Pfizer and Moderna reveal trials that show 90%+ efficacy vaccines against the Coronavirus.
Gold breaking key technical factors
Gold breached a fundamental Fib level at $1,835, looking for a next internal support/resistance level at $1,800 and the 50% retracement level at $1,761.
Gold flowing out of ETF’s
There has been a steady outflow of Gold in Gold-backed ETF funds peaking around September, where the SPDR Gold Shares ETF held around 1,300 tonnes of Gold. However, now they are around the 1,200-tonne levels.
This sustained drop has been pushing the idea that Gold all along has been rallying on the back of a self-perpetuating notion, on consistent risk-off sentiment alongside speculation from investors.
Gold’s fundamental long term trends may not be able to stop it from dropping
Many have pointed to inflation and currency debasement as factors to move the yellow metal higher. However, this may be more relevant as long term trends that will see Gold push higher form a lower price in the next 3-5 years. Goldman Sachs stated that the risk of inflation is “greater than any other time since the 1970’s”, citing green spending plans in China, Europe, and in the United States with President-Elect Joe Biden at the helm.
As risk on gets into play, the rotation out of bonds and into risk-on assets will force bond yields higher, making the opportunity cost of investing in Gold lower as it does not offer income as Bonds do. Geroge Gero, a managing director at RBC Wealth Management, stated that “the fear of missing out seems to be more important,” therefore forcing some selling pressure in the Gold market.
Furthermore, Macquire bank stated that the “cyclical bull market” for Gold has come to an end, with Marcus Garvey, Macquarie’s head of metals and bulk commodity strategy, said that “[the bank] is reasonably constructive on the global growth outlook for next year, so we think Gold has passed its peak.”
Are you looking at Gold?
Four years have passed, and now we usher in a new United States President: Joe Biden. A complete U-turn from what Donald Trump stood for. Nationalism is now replaced with Progressive politics. The question arises, how will President Joe Biden’s 100-day agenda affect the markets?
Stocks coming into 2021 – Boom or Bust?
Here are two fun facts from equities in 2020.
· The NASDAQ returned 46% from the start of 2020. If you purchased at the peak of the recessionary period in mid-March, you would’ve made a return on investment of 85%.
· Meanwhile, the S&P500 only returned 17% from the start of 2020.
· The average price/earnings ratio for stocks in the NASDAQ was pushing 23
· The best performing stock that is in the S&P 500 and NASDAQ was Tesla, providing a 743% Return.
With that in mind, what are we expecting for stocks coming into 2021?
The Dollar has been experiencing some love coning into the new year, with the DXY up just under 1%. However, is this just a technical rebound, or is there substance for a further rally?
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