17 February 2021

Gold Loses Its Shine, Plummets Below $1,800

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News shaping
the markets today

     

What’s happening: Gold futures tumbled on Tuesday, to settle below the key $1,800 support level.

What happened: Gold prices fell below the $1,800 mark for the first time in more than a week on Tuesday.

The yellow metal seems to have lost favour among investors, who turned their focus to other safe-haven assets.

Why it matters: Gold prices remained under pressure on Tuesday due to optimism around a global economic recovery, given the latest covid-1 updates, vaccine rollout news, and expectations of the US approval of the Biden administration’s $1.9 billion relief package.

Markets cheered news of a decline in covid-19 cases in the US. The seven-day average of daily new cases fell to around 85,200, down 23% from a week earlier, with coronavirus-related deaths remaining stable at about 3,000, according to figures released by Johns Hopkins University.

Even amid this optimism, safe-haven assets were added to investor portfolios due to pandemic-induced uncertainty. However, US Treasury bonds seemed to grab investor attention as the safe-haven option, given the continued rise in the 10-year bond yield, which has climbed to its highest level in almost a year.

Markets turned their back on gold purchases after the release of the New York Fed’s Empire State business conditions index, which rose to 12.1 in February, significantly beating the Street estimate of 5.9 and reaching the highest level in more than six months.

Gold futures for April delivery plummeted 1.56% to settle at $1,794.70 on Tuesday. With this performance, gold prices are down 5.62% year to date. Meanwhile, silver remained a preferred portfolio asset, rising 0.19% to $27.38, amid speculations of a potential rise in demand.

What to watch: Investors will monitor releases that indicate the performance of the global economy. Any significant deterioration or any news of rising covid-19 cases may support gold prices. Markets will also keep an eye on stock market volatility, as this affects risk appetite and boosts gold purchases.

The Markets Today

     

US stocks will be in focus today, after closing higher on stimulus hopes.

Context: The US market opened in a positive zone, after remaining closed on Monday due to Presidents Day. Wall Street stocks moved higher on Tuesday, extending last week’s gains.

Details: Investor sentiment for US equities were lifted by hopes of the US soon announcing the new covid-19 stimulus package proposed by President Joe Biden.

Markets also cheered Moderna’s announcement of being able to deliver 100 million vaccine doses to the US in six weeks.

US indices were also boosted by a surge in energy stocks, which ended the trading day with 2.62% gains. Energy stocks were driven by the continued rise in crude oil prices owing to supply concerns arising from the closure of wells in Texas, Arizona due to harsh weather conditions.

The earnings season so far has kept investors bullish. “Earnings season has provided proof of an earlier than expected rebound in corporate performance, and with fresh stimulus money likely to wing its way to the American population there is reason to expect further quarterly growth,” IG Group’s Chris Beauchamp said.

While the S&P 500 and Dow Jones index rose close to record levels on Tuesday, the Nasdaq slipped close to 0.2%. The tech-heavy index was weighed down by a decline in the shares of Apple and Microsoft.

What to watch: Investors will look out for any signs of a pullback, with US indices trading close to record highs. Markets will also monitor daily covid-19 cases, which has recently been on a downtrend.

Other Markets: Asian indices were trading mixed at 5am GMT, with the Asia Dow and Hang Seng up by 0.29% and 0.65%, respectively, while Nikkei 225 had lost 0.60%. The Shanghai stock market is close for sixteen days for the Lunar New Year holiday.

Support & Resistances
for Today

     

market snapshot

     

Futures at 0400 (GMT)

What else to watch today

     

UK’s inflation rate, retail price inflation and producer prices, South Africa’s inflation rate and retail sales, Turkey's motor vehicle production, Eurozone’s construction output and ECB non-monetary policy meeting, Canada’s inflation rate, Argentina’s leading economic index as well as the US MBA mortgage applications.

 

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