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James Hyerczyk
Gold

A rise in U.S. Treasury yields and a slight recovery from an earlier setback by the U.S. Dollar are weighing on gold prices on Monday after an early rally attempt failed. Increased demand for riskier stocks and currencies is also helping to generate some downside pressure.

At 12:46 GMT, December Comex gold futures are trading $1872.80, down $13.40 or -0.71%.

Unlike last Monday, gold is responding to demand for stocks, which appears to be encouraging traders to sell Government bonds, driving yields higher. The move suggests that today is going to be a “risk-on” session with the U.S. Dollar on the outside looking in. Should the dollar participate in the demand for risk, however, then look for gold to break sharply throughout the session.

Earlier in the session, gold was trading firm as COVID-19 cases continued to mount, raising investor expectations of further stimulus measures, while a subdued dollar added support. Coronavirus cases crossed the 11-million mark in the United States on Sunday.

However, today’s price action suggests traders aren’t paying too much attention to the rising COVID-19 number and perhaps more attention to a faster recovery in the U.S. economy as pharmaceutical companies are positioned to release even more positive developments on the coronavirus vaccine front.

Furthermore, traders don’t seem to be optimistic about a fiscal stimulus package over the short-run with both Democrats and Republicans seemingly steeping away from the negotiation table when states continue to finalize the voting for the House of Representatives and Senate.

Strong Chinese factory output data is also pressuring gold prices because it likely means the global economy won’t fall apart over the near-term.

Finally, longer-term gold traders are aware that any extreme weakness will be met with aggressive buying with the Federal Reserve watching their backs.

Daily Forecast

We could see short-term weakness throughout the session as traders await more positive COVID-19 news from the drug company labs. Additionally, gold is going to have a hard time rebounding higher without fiscal stimulus. Conditions could change rather quickly in the markets if the Republicans and Democrats announce they are returning to the stimulus negotiation table.

For a look at all of today’s economic events, check out our economic calendar.
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