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(Wallace Refiners) – With gold prices ending Friday at their lowest point since July, I am sure gold traders will be thankful to close the book on what has been a dismal week for the precious metal.
The selling pressure in gold started Monday after prices fell through critical support at $1,850 an ounce. The downtrend has not letup as the market, Friday, fell through the next significant support level at $1,800 an ounce. Analysts and traders are now keeping their eye on $1,750, which is just below the 50% Fibonacci retracement level from August’s all-time highs.
Although the gold market is ending this abbreviated holiday trading week on a week footing, some analysts have noted that investors should take Friday’s selloff with a big grain of salt as the volume is extremely thin.
Gold’s selloff Friday comes even as the U.S. dollar struggles for direction and bond yields fall. According to some analysts, there is no fundamental reason why gold should be trading at a fresh 4-month low.
As the gold prices weakens, we are even started to see long-term forecasts being revised. The big news of the week came Tuesday after Bank of America announced that has abandoned its $3,000 target for gold by late 2021 because of the vaccine news.
The bank still sees gold prices holding above $2,000 an ounce next year, but the bullish swagger is gone.
“As the global economy opens up, gold faces more challenges, making it tricky to hit $3,000/oz; that said, the ongoing fiscal and monetary stimulus should push the yellow metal above $2,000/oz again,” the bank’s analysts said in its 2021 outlook report.
So is this selloff a strategic buying opportunity or just the start of a more significant move?
I do question whether the optimism we have seen driving equity markets is misplaced. Many analysts and economists I have talked to during this past week have said that there is still a lot of uncertainty surrounding the economy.
For instance, the Century Foundation, a nonpartisan think tank, said in a recent report that 12 million could see their unemployment benefits run out by Dec. 26.
So while there is plenty to be thankful for this weekend, there is still the potential for more turmoil to come.
Stay safe and have a great weekend.
Disclaimer: The views expressed in this article are those of the author and may not reflect those of Wallace Precious Metals The author has made every effort to ensure accuracy of information provided; however, neither Wallace Precious Metals nor the author can guarantee such accuracy. This article is strictly for informational purposes only. It is not a solicitation to make any exchange in commodities, securities or other financial instruments. Wallace Precious Metals and the author of this article do not accept culpability for losses and/ or damages arising from the use of this publication.
