Gold price is down by more than 60 basis points today mostly because of second wave fears. Other precious metals like silver, palladium, and platinum are also down by 1%, 1.47%, and 0.20% respectively. Similarly, base metals like lead, nickel, zinc, and copper are down by more than 1% while the US dollar index is down by 0.20%. The Bloomberg commodity index, which tracks key commodities is down by more than 0.70%.
Why is Gold Price Tumbling?
It is ironic that gold price is tumbling today. Ironic because gold is often touted as a safe haven asset whose price appreciates when there are risks. Today, fresh risks have emerged in the market. First, China has confirmed a new cluster of coronavirus in Beijing, the capital city. While the number of the reported cases is relatively small, there are risks that it could metamorphosis into something bigger.
Second, North Korea and South Korea are getting closer to conflict. Just last week, North Korea removed the communication channel that existed between it and the south. And during the weekend, the conflict accelerated as the North threatened the south of military action. In a statement, Kim Jong Un’s sister blamed the south for aiding North Korean defectors to send propaganda in the north.
Still, many analysts believe that the North is using defectors as an excuse. Instead, they believe that the North is targeting the United States, which has maintained its sanctions.
Gold price is also struggling because of recent news by Pandora, the biggest jewellery firm in the world. In a statement two weeks ago, the firm said that it was moving its production to 100% recycled gold. This is a major news at a time when demand for physical gold is dwindling in Asia.
The gold price is currently at $1,720, which is lower than this year’s high of $1,765. On the daily chart, the price is between the $1,669 and $1,765 channel that has been forming since April. The price is still above the 100-day and 50-day exponential moving average. At this stage, the outlook of gold price is neutral considering that the Fed interest rate decision last week did not move the price. Still, the two limits of the channel will be the key support and resistance points.