Gold, which has proved to be one of the finest asset classes in this pandemic year and rose to a lifetime high of $2089.2/ounce in August 2020, plummeted to a 9-week low of $1851 an ounce before settling the week at $1866.2/oz, with a loss of -$96 or -4.9% as USD showed a sharp recovery from its 2½ year low to a 7-week high of 94.68 last week with a gain of about 0.90%.
Prices of gold and silver have lost about 10% and 22.8% respectively from their recent highs of $2089.2 and $29.915, hit in the month of August.
As DI has given a positive breakout and “Buy-Setup” in Daily Charts, possibilities of further gains in it is very high, probably will be heading towards 96.5 in the days to come, which will poise more “Bearish-Trend” in the bullion ahead.
Volatility, which was dry for more than 1½- month, has jumped not only in the bullion market but also in other assets like, Energy, Base Metals, USD & other FXs and Global Stocks.
The recent spike in European COVID infections is poising a renewed threat for another shutdown of the part economy in an attempt to slow the spread of the virus. France, on Thursday, reported a record of 16,096 new COVID infections and on Sunday about 11,123 cases. The UK on Thursday reported 6,634 new infections, the most since the start of the pandemic, and 5693 new cases on Sunday, and Germany reported 2,321 new COVID infections on Friday, the most since April. The COVID virus has now infected 33.304 million persons globally, with deaths exceeding 10,02,389.
Nonetheless, Gold has medium-term support from the COVID pandemic that has curbed global growth prospects and prompted the world's central banks to maintain or even expand their QE programs. Apart from that heightened U.S. political tensions and US-China Spat are other factors that are lending support to the safe-heaven instrument gold.
Long gold positions in ETFs on Monday rose to a new record high of 3,451.34 metric tons (data since 2002). However, liquidation of long silver positions has emerged with long silver positions in ETFs falling to a 1-3/4 month low on Thursday, down from Aug's record high of 897.10 million troy ounces
Bearish factors for the complex include (1) fears of long-term deflation due to the massive economic damage from the pandemic, and (2) sharply reduced industrial metals demand, including for silver, due to the plunge in global economic activity from the COVID pandemic.