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Gold in $40 Meltdown as U.S. Stimulus Talks Hit Wall

CommoditiesDec 09, 2020 03:03PM ET
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By Barani Krishnan

Investing.com - Gold’s scintillating comeback from $1,700 lows hit a wall on Wednesday as Senate Republicans stalled again aid for the coronavirus pandemic that has killed nearly 290,000 Americans and left millions of others waiting in food lines.

Gold for February delivery on New York’s Comex settled down $36.40, or nearly 2%, at $1,838.50 an ounce. That was just over $40 below Tuesday’s session peak of $1,879.75 — which marked a three week high.

The spot price of gold, which reflects real-time trades in bullion and which algorithms and hedge funds use to decide on the next immediate direction, was typically lower than the benchmark futures contract.

At 2:34 PM ET, about an hour after the official settlement on COMEX, spot gold was at $1,834.90, down $40, or 2.1%, from the previous session’s last trade. A drop below $1,835 on the spot could be bearish for gold overall, creating pressure a downside under $1,820, said chartists.

“We could test 1,818 before strong support emerges,” said Sunil Kumar Dixit at SK Dixit Charting in Kolkata, India.

Gold’s meltdown came as outgoing president Donald Trump cut unemployment benefits in his latest offer on Covid-19 aid, even as Republican negotiators led by Senate Majority Leader Mitch McConnell seemed agreeable to liability protection and state aid demanded by Democrats in Congress. It was the latest of multiple twists and turns on the saga since June, and prompted the Democrats to disagree.

“McConnell is not yet showing any signs delivering an olive branch to Democrats,” said Ed Moya, analyst at New York’s OANDA. “The White House and many Republicans want to get a deal done, so it might be a matter of a few more days before McConnell pivots.”

“Gold’s volatility is easing and until it makes a transition to the reflation trade, the long-term bullish outlook might take a while longer to reassert itself.”

Just days ago, gold was emerging from one of its most brutal sell-offs ever after dynamic breakthroughs in COVID-19 vaccines and their potential availability before Christmas caused a run on money in safe-havens.

The yellow metal lost about 6% of its value in November, its most for a month since 2016 and fell into $1,700 territory. Investors have in recent weeks directed money mostly into stock markets and other risk assets such as oil, as those witnessed an epic rally amid the notion that vaccines and therapeutics would soon bring an end to the spread of the coronavirus.

Congress originally passed in March the Coronavirus Aid, Relief and Economic Security (CARES) Act, dispensing roughly $3 trillion as paycheck protection for workers, loans and grants for businesses and other personal aid for qualifying citizens and residents.

In the past few months, however, Democrats in Congress have been locked in a bitter debate with Republicans in the Senate on a successive relief plan to the CARES Act. The dispute has basically been over the size of the next stimulus as thousands of Americans, particularly those in the airlines sector, risked losing their jobs without further aid.

The stalemate appeared broken last week after a bipartisan group of Democrats and Republicans proposed a $908 billion relief bill, which led the two sides to resume negotiations.

Gold in $40 Meltdown as U.S. Stimulus Talks Hit Wall
 

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Comments (8)
Luis Angulo
Luis Angulo Dec 09, 2020 7:59PM ET
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Lets Print more money!!
Ronpaul bot
Ronpaul bot Dec 09, 2020 7:06PM ET
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Im redirecting my portefolio to gold stocks and even some small commodity gold.From 10% I increase it to 30%.Im starting to see real problems in the economy of the EU and Fed and ECB money injection is coming.China most likely will devalue the yan or buy USD.Then funds taking their bonds and putting into stocks, already correcting the market precovid or higher makes no sense.The only way to protect value will be in gold.Sometimes I see this huge bubbles on stocks right before they brust and Gold lower than it should.. I wonder if this is made on purpose by big instituitions to trap and steal value from bulls.
Fabio falec
falec Dec 09, 2020 7:06PM ET
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Agree mostly, but I don't think long term China is interested to own US debt hence more dollars.
VFor Vendetta
V4Vendetta Dec 09, 2020 5:17PM ET
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Even thou vaccine hits the society hard, we will see at least couple of stimulus packages. keep it up and heal the nerves, guys ;) Most probable scenario is that traders that jumped in on a positive news of stimulus progress have just departed, which sets the stage for gold to head even higher when they are back on a next stimulus talks progress news ;) Remember that we are VERY far from health crisis end, meanwhile the economy dove very deep into solvency crisis while attempted to solve liquidity crisis.
Mike Brarey
Mike Brarey Dec 09, 2020 4:54PM ET
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Time to ride the red wave
Darryl Parvin
Darryl Parvin Dec 09, 2020 4:54PM ET
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"Meltdown" is a bit dramatic, lol.
Barani Krishnan
Barani Krishnan Dec 09, 2020 4:54PM ET
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$40 down in 2 hours isn't appropriate to be called a metldown, Parvin? Maybe you should reacquaint yourself with average market moves over minutes.
la popeye
la popeye Dec 09, 2020 4:25PM ET
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no reason for gold to go down. if traders get out the stocks bubble, one of safe haven is gold, not TB.Or fed is selling paper in order to have ammunition for saving the crash coming as a chritmas present.
Ridha B younes
Ridha B younes Dec 09, 2020 4:21PM ET
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the moral of the report is reminding Americans about the fatalities anchored by the virus scaring the whole country reminding them small businesses that they don't deserve to be saved so they need to beg and beg some more. bullying techniques from the art of the
Thiago Henri
Thiago Henri Dec 09, 2020 3:22PM ET
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Good news Barani :) ..... I was thinking we will sell from 1900 but here in 1835 to 1780 is very good...maybe the people of airlines sector after 6 months of yours reports finally will lost their jobs :P.....stimulus will come ....but put this on table.... just with next president in March! Tomorrow we can watch 1810 and possible 1780 next week ....
Agus Riyadi
Agus Riyadi Dec 09, 2020 3:22PM ET
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So good time to sell or buy bro ?
Edward Chong
Edward Chong Dec 09, 2020 3:22PM ET
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1780 haha ok.
Thiago Henri
Thiago Henri Dec 09, 2020 3:22PM ET
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Agus Riyadi  sells above 1835 buys under 1810 for long ...if youre short need watch the economic calendar ....we can up and down all days ...if you need professional help https://www.investing.com/members/contributors/200219735
Thiago Henri
Thiago Henri Dec 09, 2020 3:22PM ET
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Edward Chong  Im here for 8 years ... I dont need fake acounts spam more following me k
 
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