James Hyerczyk
Add to Bookmarks

Gold futures are edging higher on Thursday, supported by a weaker U.S. Dollar on extremely low holiday volume. Gains are likely being capped by the lack of major players in the market, but primarily by a slight rise in demand for riskier assets.

At 09:26 GMT, February Comex gold futures are trading $1881.90, up $3.80 or +0.20%.

Know where Gold is headed? Take advantage now with 

Trading Derivatives carries a high level of risk to your capital and you should only trade with money you can afford to lose. Trading Derivatives may not be suitable for all investors, so please ensure that you fully understand the risks involved, and seek independent advice if necessary. A Product Disclosure Statement (PDS) can be obtained either from this website or on request from our offices and should be considered before entering into a transaction with us. Raw Spread accounts offer spreads from 0.0 pips with a commission charge of USD $3.50 per 100k traded. Standard account offer spreads from 1 pips with no additional commission charges. Spreads on CFD indices start at 0.4 points. The information on this site is not directed at residents in any country or jurisdiction where such distribution or use would be contrary to local law or regulation.

Gold may actually be in a sweet spot on the daily chart – between the 50% and 61.8% levels of its November to December trading range.

Helping to underpin prices are an accommodative Fed and hopes for additional fiscal stimulus next year after President-elect Joe Biden takes office on January 20. Keeping a lid on gains, however, are worries that a successful launch of coronavirus vaccines will put the global economy on a faster track toward recovery.

With the recent Fed pledge to keep interest rates low until the economy is ready and new stimulus from the U.S. government earlier this week, gold traders seem ready to move on to the next set of events that could launch another short-term rally before Biden takes office.

This week, traders were introduced to a new strain of coronavirus that could derail the economic recovery by offsetting the impact of the vaccine. This would increase the need for further stimulus, which would provide additional support for gold.

Also providing support for gold is the news that Britain and the European Union were on the cusp of striking a narrow trade deal. If accomplished then traders expect the British Pound and Euro to be lifted, which would put further pressure on the U.S. Dollar. A weak dollar will be good for dollar-denominated gold because it would drive up foreign demand for the asset.

Although gold is likely to remain supported by monetary and fiscal stimulus, and a weaker dollar, it could face headwinds from other assets like stocks and Bitcoin. These investments are competing for the same U.S. Dollars being dumped onto the market.

Gold could rally, but the move could be labored and not look anything like the move we saw earlier in the year. If the dollar continues to weaken, the new money hitting the market will seek the best return. Since gold doesn’t pay a dividend or interest, it could struggle when competing against other assets that provide a yield like Treasurys and stocks.

Finally, don’t even think about buying gold for its so-called “safe-haven” appeal. This year served as proof that gold is not the “go to” safe-haven. That position has been taken over by the U.S. Dollar, Treasurys and the Japanese Yen.

After the initial rally earlier in the year, gold gave back 50% of the rally and is currently hovering just above this level. That’s hardly the characteristic of a safe-haven asset especially in the wake of the surge in COVID-19 cases and deaths.

For a look at all of today’s economic events, check out our economic calendar.
Don't miss a thing!
Discover what's moving the markets. Sign up for a daily update delivered to your inbox

Trade With A Regulated Broker