Gold price falls $ 100 this week as economic outlook remains bleak, Bitcoin competes for safe haven status

(Kitco News) Gold fell about 4% on Friday as investors sold the precious metal amid a rising U.S. Treasury yield market.

February Comex gold futures traded at $ 1,839.40 for the last time, down 3.88% the day after breaking the key $ 1,850 an ounce level.

“There are two catalysts at the moment that cause the sale of gold. Increased bond yields and troubled economy. This is causing liquidation and cash outflows, “said Peter Hug, global sales director for Kitco Metals.” Ten-year bond yields have risen above 1.1%, a significant advance in “This morning you also had much more negative employment data than expected, which indicates that the US economy could have problems during the first quarter.”

The market’s usual reaction to bad economic news is cash change, Hug noted. “Commercial ads are coming out of gold and they are making cash, they are being implemented in the equity market or ten-year bond yields,” he said. “There has also been a disappointing deployment of vaccines. It will get worse before it gets better. ”

Hug added that it is starting to look similar to what happened in March when gold was sold in the middle of the first round of COVID-19 blockades.

Sean Lusk, co-director of Walsh Trading, told Kitco News that he helped reduce gold with a technical wash. “We still had a lot of time in the market. The locks tighten. The whole flow goes to the stock market.

Rising Treasury yields are one of the main culprits for lower gold prices, Lusk noted. “What’s more, you had a rise in Treasury yields, which decreased your appetite for gold, and we got a $ 100 investment this week,” he said.

The Treasury’s higher yields offer a bit of a bid for the U.S. dollar, which is responsible for selling gold, said Edward Moya, a senior market analyst at OANDA.

“Right now there is a mixed outlook for the dollar. The bearish trade of the dollar has saturated. So investors are undoing some gold bets because there is a forecast of a rebound in the dollar, ”Moya said.

Another factor is the competition from bitcoins, according to analysts. Although gold prices lost $ 100 this week, Bitcoin rose more than $ 10,000, reaching an all-time high above $ 41,000 on Friday.

“Bitcoin is a bit attractive here. Nothing rational behind that, ”Lusk said.

There is a big fundamental change happening for many investors, Moya said. “Expectations about gold as a hedge for inflation have passed behind cryptocurrencies, especially bitcoin,” he told Kitco News. “Right now there’s too much institutional interest diversifying from gold.”

Moya sees the bitcoin bubble finally burst and gold rises with the idea that it is a big hedge of inflation.

Price levels

In the future, the big question is whether or not to maintain the $ 1,850 level, analysts said.

Short-term falls of about $ 1,850 were bought in mid-December, which is what could happen here as well, Lusk noted.

Hug said he was surprised to see gold go down so much on Friday. “I thought the $ 1,875 level would be maintained. I don’t expect gold to open $ 1,850 today. And as long as this level is maintained, the gold market continues to rise.

If gold falls below $ 1,850, $ 1,825 is possible, and if that doesn’t hold, $ 1,800 becomes support, Hug added.

Lusk is studying whether or not to keep $ 1,828. “If we reached $ 1,800, we would go down about 5% from the year,” he said. “Closing less than $ 1,828 will take you to $ 1,800. And $ 1,778 is the next low.”

Moya added that he will see prices finally stabilize, but first he would like to maintain the $ 1,850 level. “Everyone will be focusing on the November lows when we saw gold fall below $ 1,770. That will be the sand line. I would be surprised to see $ 1,800 breached,” he said.