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Market Review 27 November 20

27 November 20

Gold Price Analysis: XAU/USD hangs near multi-month lows, just above $1800 mark

  • Gold continues to find some support ahead of the 200-day SMA, around $1800 mark.
  • A subdued USD demand was seen as a key factor that benefitted the yellow metal.
  • COVID-19 vaccine optimism undermined the safe-haven commodity and capped gains.

Gold has managed to recover an intraday dip to the $1803 region, albeit lacked any strong follow-through buying. The commodity was last seen trading around the $1810 region, nearly unchanged for the day.

A softer tone surrounding the US dollar assisted the dollar-denominated commodity to once again bounce off the $1800 neighbourhood, a support marked by the very important 200-day SMA. However, the optimism over a potential vaccine for the highly contagious coronavirus disease continued denting demand for traditional safe-haven assets and kept a lid on any meaningful move up for the XAU/USD.

The US dollar prolonged its recent downward trajectory and was further pressured by unimpressive US macro data, which raised expectation for more fiscal stimulus from the incoming Biden administration. The greenback was further pressured by a fresh leg down in the US Treasury bond yields, which extended some additional support to the non-yielding yellow metal, though bulls lacked any conviction.

The positive factor, to a larger extent, was offset by the upbeat market mood, which capped the upside for the safe-haven precious metal. The global risk sentiment remained well supported by the progress toward remedies for COVID-19. This, along with the smooth beginning of President-elect Joe Biden’s transition to the White House, boosted investors’ appetited for perceived riskier assets.

From a technical perspective, the commodity’s inability to register any meaningful recovery suggests that the recent selling bias might still be far from being over. In the absence of any major market-moving economic releases, the outlook remains tilted in favour of bearish traders. Hence, any recovery attempt might still be seen as a selling opportunity and runs the risk of fizzling out quickly.

Stocks hover near record high, oil skids on demand outlook

Asian shares stalled near record highs on Friday as investors weighed renewed doubts about a highly-anticipated coronavirus vaccine against hopes that some of the region’s economies will recovery quicker than their Western peers.

MSCI’s broadest index of Asia-Pacific shares outside Japan dipped 0.04% but remained with striking distance of a life-time peak touched this week.

Australian shares ended down 0.53%. Treasury Wine Estates Ltd tumbled by 11.25% after China slapped tariffs on Australian wine, which is likely to worsen a diplomatic row between Beijing and Canberra.

Japan’s Nikkei rose 0.33% in choppy trade.

Shares in China rose 0.13% after data showed Chinese industrial profits surged at the fastest pace since early 2017. South Korean stocks also rose 0.27%.

U.S. S&P 500 e-mini stock futures fell 0.09%. U.S. financial markets were closed on Thursday for the Thanksgiving holiday and will trade on a partial schedule later on Friday.

Euro Stoxx 50 futures were down 0.26%, German DAX futures fell 0.24%, and FTSE futures were down 0.22%, suggesting a soft start to the European session.

U.S. oil prices extended their declines from a seven-month high due to signs of oversupply.

British drugmaker AstraZeneca’s coronavirus drug was touted as a “vaccine for the world” due to its inexpensive cost, but the efficacy of the vaccine is now facing more intense scrutiny, which experts say could delay its approval.

Several scientists have raised doubts about the robustness of results showing the shot was 90% effective in a sub-group of trial participants who, by error initially, received a half dose followed by a full dose.

“With global case numbers having now topped 60 million… there is certainly some rough terrain ahead for the global recovery, and that can create economic scarring,” analysts at ANZ Bank wrote in a memo.

MSCI’s broadest gauge of world stocks was up 0.08% on Friday, sitting just below a record high reached in the previous session.

Concerns about the distribution of a coronavirus vaccine have placed renewed focus on the current state of the pandemic, which looks grim for many places.

U.S. hospitalizations for COVID-19 are at a record and experts warn that Thanksgiving gatherings could lead to further infections and deaths.

More than 20 million people across England will be forced to live under the toughest restrictions even after a national lockdown ends on Dec. 2. Partial lockdowns in some European countries have also raised concern about economic growth.

The European Central Bank’s chief economist highlighted these concerns in dovish comments on Thursday, which pushed European bond yields lower.

The euro, which last bought $1.1924, showed little reaction because currency traders have largely priced in expectations for additional ECB easing next month.

The dollar index fell toward its lowest in more than two months.

The yield on benchmark 10-year Treasury notes fell to 0.8586% as some investors sought the safety of holding government debt.

U.S. crude dipped 1.82% to $44.88 a barrel. Brent crude fell 0.17% to $47.72 per barrel.

Fuel demand is falling due to renewed coronavirus lockdowns, but some oil producers are not complying with agreed production cuts, which raises concerns about oversupply.

Bitcoin, the world’s biggest cryptocurrency, edged up to $17,256 on Thursday, but it tumbled by 8.4% in the previous session after failing to take out its record high of $19,666.

The cryptocurrency showed little reaction to a report in the Financial Times that Facebook will launch its own Libra digital currency in limited format next year.

Bitcoin has rallied around 140% this year, fuelled by demand for riskier assets.

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