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Mark O' Donnell
Research Analyst
November 24, 2020

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 continues to push downwards to that key 50% retracement level

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

Gold outflows from Gold Back 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.”

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