The gold price was 0.25% higher on Monday but last week’s bearish move still brings the risk of further downside. Gold crashed by $100 last Monday after news of a potential virus vaccination emerged.
The emergence of a coronavirus vaccine removes the key pillars of the precious metal’s advance this year as it reduces safe haven demand and also brings more clarity to the amount of stimulus that central banks and governments may embark on in the month’s ahead.
Another headwind for gold could be a reduction in ETF flows, which was a key driver of price gains in the first half of the year. H1 global net inflows into gold were $39.5 billion in gold, which was a record high. An estimated $11 billion in Q3 pushed gold ETF assets under management to around $130 billion. This trend could be hampered after gold’s recent drop and demand could slip further if bullion sees further lows.
A report from JP Morgan last week suggested that investors are now moving from gold ETFs into Bitcoin. The report said:
Corporate endorsements of bitcoin and in particular the endorsement by Paypal a couple of weeks ago appear to have propagated further demand for bitcoin.
The report added that “the potential long-term upside for bitcoin is considerable if it competes more intensely with gold as an ‘alternative’ currency…”
Gold Price Technical Outlook
The gold price crashed last week to create a bearish close and the only positive for bulls is that the price closed above the $1863 support level, which supported price in August and September. Despite this hold, bullion would need a strong move back above the $1960 level to find a bullish path again. The $1750 level is support for gold with the 50 moving average. The Investing Cube team is currently available to help all levels of traders with the Forex Trading Course or one-to-one coaching.
Gold Price Weekly Chart