- Gold prices stabilising in a demand zone with a focus on the Fed.
- COVID’s third wave in the US is spreading through states, troublesome for US economic growth and the US dollar.
The price of the yellow metal is holding the bid at the start of the week but has been pressured to an area of support in recent sessions.
At the time of writing, XAU/USD is trading at $1,888.83 between a low of $1,880.60 and a high of $1,891.82.
Gold fell off a cliff last week, cracking the $1,900 level, on the news of a covid vaccine but has since established a demand zone in the low $1,880s.
However, the recovery in real rates and USD continue to cap any material upside in gold.
Eyes on the Fed
The greenback is a major focus, especially as the rate of the second wave has covered all states of the US swiftly, dwarfing the positiveness of a vaccine and a potential upset for the US economy.
Lockdowns, as a consequence, will drive a reactive rather than proactive Federal Reserve to keep the door open for the pain trade to grow in the near-term, as we approach the December meeting.
In fact, analysts at Standard Chartered Bank said if the Fed considers it necessary to ease its likely to do so in coming weeks, ahead of the FOMC meeting.
The analysts suggest that the Fed could increase monthly US Treasury purchases by about 50% (i.e. to USD 120 bn/mth) and could add measures targeted at encouraging credit provision to business.
”With the Fed’s Flexible Average Inflation Targeting framework aiming to stimulate inflation with a period of overshooting, the Fed may step in to keep policy support for the foreseeable future,” analysts at TD Securities explained.
” All of this suggests real rates should continue on their downward trajectory and ultimately continue to fuel a bull market in gold into 2021,” analysts at TDS argued.
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