- Global stock markets suffered a sell-off.
- If Europe falls into a blockade again, huge debts, bankrupt companies, soaring unemployment, and the risk of a devaluation of the euro.
- It is inevitable for gold to be dragged down by a sharp drop in the stock market.
In the past week, spot gold fell by more than 100 US dollars, and spot silver plummeted by nearly 15%. The market logic is very clear, that is, the liquidity panic in the context of the global epidemic, especially the worsening epidemic in Europe, the dollar index rose sharply, hitting two months high.
Global stock markets suffered a sell-off, which is very similar to the global outbreak in March, which also led to the decline of gold.
Taking into account the weakening of the short-term selling pressure of precious metals, the gold market outlook needs to pay attention to these five points.
1. The performance of the US dollar
2. The stagnant interest rate
3. Key positions
4. ETF holdings
5. The uncertainty of the US election
The global epidemic has worsened, and the European epidemic is even worse.
The second European epidemic is fierce, and the number of new confirmed cases in many countries has increased in a single day. However, due to the economic pressure of strict restrictions on the epidemic, the European government is still worried about whether it should be tough again blockade. This caused the dollar to rise sharply, reaching a two-month high.
Previously, some economists believed that after a round of blockades in the spring and summer of this year, European governments should now understand that the blockade of the economy will seriously affect efficiency and cause huge damage to employment and economic activities.
If Europe falls into a blockade again, huge debts, bankrupt companies, soaring unemployment, and the risk of a devaluation of the euro will bring about economic and social crises that will last for several years.
Gold futures recorded the biggest weekly decline in about six months; the price of gold futures for December delivery on the New York Mercantile Exchange fell by $10.60, or 0.6%, to close at $1866.30 per ounce, the lowest closing price in two months. This week, the price of gold futures fell by 4.9%, the biggest weekly decline since the week of March 13.
December silver futures prices fell 10 cents, or 0.4%, to close at 23.093 US dollars per ounce, the lowest closing price since late July. Silver futures fell 14.9% this week, the largest since the week of March 13 Weekly decline.
Naeem Aslam, the chief market analyst at AvaTrade, said that the main reason for the decline in gold futures prices this week was the strengthening of the U.S. dollar. Gold transactions were denominated in U.S. dollars.
The recent strength of the U.S. dollar made gold prices more expensive for traders using foreign currencies. The chaos caused the U.S. dollar index to climb, which magnified the weakness of gold prices.
The global stock market selling pressure made gold unfavorable, but the gold market will eventually get rid of the influence of the stock market. The global stock market continued to fall this week.
Analysts have been discussing fundamentals and economic weakness. The divergence of the soaring stock market.
Mike McGlone, a senior commodity strategist at BI, said that it is inevitable for gold to be dragged down by a sharp drop in the stock market, but afterward, it is optimistic that the gold market will rebound again.
A sharp drop in US stocks like March will bring about a stress response in the gold market, but the increased volatility of the stock market and the possibility of entering a bear market will create bottom support for the gold market outlook.