Gold Tumbles Back Below US$1,900 As Technicals Drive Selling

(January 8th 2021 - Eddie Spence, Bloomberg News)

Gold dropped below US$1,900 an ounce as technical selling took over after an earlier recovery in the dollar and Treasury yields sent prices tumbling.

Bullion fell as much as 3.3 per cent in New York, the most since Nov. 9, erasing gains made at the start of this year. The plunge came as stock futures rose after data showed a sharp slowdown in U.S. hiring, bolstering speculation on further stimulus. Gold’s initial drop was exacerbated after prices breached the 100-day moving average, a key technical level.

Gold has swung sharply since the start of the new year as higher benchmark Treasury yields and growing expectations of economic support pressured prices, while a raging pandemic, uncertainty on a global economic recovery and expectations of rising inflation remain tailwinds for the metal.

“It is the first week of January and the staying power for positions tends to be low so moves can get exaggerated,” Tom Fitzpatrick, a Citigroup Inc. technical strategist, said in an emailed message. The range between roughly US$1,849 and US$1,855 is a key area to watch, given the move lower is similar to a pattern in November when yields and the dollar also pressured gold, he said.

The two Democratic wins in Georgia’s Senate runoffs this week give U.S. President-elect Joe Biden full control of Congress, allowing him to push through more stimulus and higher spending on economic reconstruction.

Spot gold dropped 3.2 per cent to US$1,853.66 an ounce by 11:13 a.m. in New York. The metal is set to post its first weekly decline in six weeks. The Bloomberg Dollar Spot Index was little changed, after earlier gaining as much as 0.2 per cent.