The December gold contract has seen choppy trade action lately as prices have retreated from the August high of $ 2,089 to levels around $ 1,940. Recent equity market gains, the strengthening US dollar and developments in COVD-19 treatment have helped curb the bullish momentum in gold, according to Charles Schwab.
The stock markets started the week on a positive note, with the FDA approving the use of convalescent plasma, which contains antibodies from recovered COVID-19 patients. Bulls in the stock market have pushed the NASDAQ Composite Index and the S&P 500 to new highs. The generally improving trend in the decline in COVID-19 cases in the United States has also supported the bulls in the stock market. All of this to the detriment of the gold bulls, as strong stock markets can lead to a drop in demand for gold, a hedge used against the uncertainty created by the pandemic.
“Those with an optimistic view of gold saw the weakness of the US dollar as a major catalyst for their case. Since the start of August, the US dollar index has essentially stabilized and has traded sideways. Traders may want to look to a major breakout in resistance or support in the US Dollar Index to indicate the next move in gold. “
“Gold is seen as a hedge against inflation and Fed Chairman Jarome Powell is due to deliver a speech Thursday at the virtual version of the Fed’s annual conference in Jackson Hole. In this speech, President Powell is expected to highlight the Fed’s approach to raising rates as well as improving unemployment. Many analysts expect Powell to talk about targeting “average inflation,” meaning the Fed will allow rates to rise if they have been lower for an extended period. A more accommodating stance by the Fed on interest rates could give the gold bulls a headwind. “
Looking at the December Gold Daily (GCZ20), prices are below the 20-day simple moving average but above the 50-day SMA. Short-term support appears to be in the $ 1915 area and traders may also want to look to the 50 SMA at $ 1,895.60 for additional support. Resistance can be found at $ 1,939.00 and $ 1,950.00. “