At present, the dollar is facing a rough time, however, if there is anything having it worst than the dollar, that would be the gold. The USD is experiencing serious difficulties due to hopes for vaccination and the associated global economic recovery, as well as due to the reduction of political uncertainty in the US. Almost the same concerns that troubles the precious metals. The gold is losing its luster amid the desire of investors to jump on opportunities through the S&P 500 and Bitcoin. The US stock indexes continue to update historical highs, and the cryptocurrency is one step away from updating the record peak. People need money to buy something that will make a profit in the future, and they are ready to get rid of other assets. Including selling XAUUSD.
Until recently, the position of gold seemed unshakable. There was confidence in the precious metal against the background of low real yields on US Treasury bonds, forecasts of a weak dollar, and huge flows of cheap liquidity from the Fed. There were rumors in the market that it was ready to return above $ 2,000 an ounce, and ETF stocks at their peak in October increased by 900 tons, twice as much as in the whole of 2019. Unfortunately, news of successful trials of COVID-19 vaccines turned everything upside down. The announcement of the first of them, from Pfizer and BioNTech, triggered a rapid rally in the US debt market rates and the second-largest sale of XAUUSD in the last 7 years. Since then, stocks of specialized exchange-traded funds have declined by 60 tons, and gold has reached the critical level of $ 1,800 per ounce at arm's length.
Gold ETF stock dynamics:
It should be noted that not all the bulls threw out a white flag. According to Goldman Sachs, the current collapse of gold is nothing more than a correction to an upward trend, which should be used for purchases. Inflation will accelerate, and with it, interest in the precious metal will return. Personally, this reminds me of the events of 2011-2013, when XAUUSD buyers also gave many arguments in favor of restoring the bullish trend. We mentioned cheap liquidity, low rates on the global debt market, an increase in the debt burden, and inflation. To their disappointment, the gold fell like a stone.
Deutsche Bank believes that this time it may be different, as the savings rates of American households increased from 8.3% before the pandemic to 14.3%, which is fraught with a crackdown on consumer prices. However, in my opinion, Macquarie's forecast of a decline in prices for the precious metal to $ 1,550 per ounce in 2021 looks much more realistic. According to the company, the cyclical bull market for gold has come to an end. Even a falling US dollar won't save it. When the crisis subsides, and expectations of future monetary easing by the Fed are reduced, XAUUSD falls into a wave of sales.
Technically, in accordance with the 161.8% and 200% targets for the AB = CD harmonious trading pattern, gold can collapse to $ 1,775 and $ 1,725 per ounce. I recommend keeping and increasing short positions on the precious metal formed within the previous recommendations from the levels of $ 1882, $ 1872, and $ 1855 on pullbacks.
Gold, daily chart:
