After failing in their move to breakout above the October high, the gold bulls have been dragged back to be nullified once more. As the market lacks conviction ahead of some crucial fundamental events in the coming days, the near term outlook seems to be a waiting game.
Fiscal stimulus in the US is still being negotiated, but as yet no agreement. The US election may be moving in Joe Biden’s direction, but the immediate potential for over $2 trillion of fiscal support for Main Street Americans is clouded with uncertainty. Rising COVID-19 cases leaves traders concerned and their appetite for risk is faltering. Subsequently the US dollar has found support in recent sessions. This does not help gold.
Gold is not playing as a safe haven right now (it has not done for several weeks ). The dollar (and the yen) are playing out that role right now. What is interesting though, is that in recent sessions, as equities have fallen sharply, yields have fallen too and the dollar has risen (all pointing to a safe haven bias) there has also been little real move on gold. In recent weeks, gold would have been falling (positively correlated to bond yields). However, the yellow metal has barely budged and is losing its strong correlations with both the dollar (previously strongly negative) and Treasury yields (now losing its abnormally positive correlation).