Gold: After a rebound, have fundamentals changed much?

Gold Sand
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.

Related tags: Gold Commodities

Open an account in minutes

Experience award-winning platforms with fast and secure execution.

Web Trader platform

Our sophisticated web-based platform is packed with features.

Economic Calendar