Gold Down but not out
26 November 2021
Friday 26 November 2021
In this week's market report:
High speed U-turn
Australian dollar protects Australian gold positions
Did the Fed just confirm US inflation is running hot?
Inside our office this week…
Before you go…
Shae Russell,
Group Communications Manager
Dear Investor,
US dollar gold price [XAUUSD] Daily chart
Source: Trading View
U turn at high speed: After last week’s rally extending all the way up to an intraday high of US$1,877 last week, gold has pivoted at high speed and went straight back to familiar support at US$1,790s, down 3.13% for the week.
Did this end gold’s rally? No, but as Nick Frappell, ABC Bullion’s Global General Manager spoke about gold this morning, ‘it’s hardly a change in trend, more of plunge, but it’s not all bad news’.
Hang on, Bulls: The plunge isn’t completely bad news:
Spot gold stopped at familiar support of US$1,790s.
A Rickshaw (or Long legged) Doji formed overnight on 25th Nov (circled in black), however it’s what happened after this Doji that matters.
The formation of the Rickshaw Doji happening at previous support, and then followed by an up day (26th Nov) suggests that it shouldn’t get much worse for gold.
Down, but not out Bears: Frankly bears, it all depends on how well spot gold stays above this support. We’ll revisit this next week.
Gold leads all other precious metals down: No precious metal was spared this week, with silver, platinum and palladium all sinking:
Silver down 4.2% to US$23.60 per ounce
Platinum is almost 5% lower. It did retest a monthly low of U$955.00 per ounce during this week. This low may be the reason why we saw an influx of platinum orders…
Palladium bore the brunt of precious metal selling this week, with Pd lower by 9.55% to US$1,864. Worth noting, is that spot palladium was pushed lower than the September sell-off, back down to a price level not seen since July last year. Palladium prices may start to pick up in the coming weeks as major Japanese auto makers say normal production will resume in December.
Aussie dollar protects Australian gold positions: The Australian dollar gold price [XAUUAD] wasn’t spared either this week, down 1.80% to AU$2,505. Once again, the Australian dollar softened the blow of spot gold falling. At the time of writing, XAUAUD looks to be turning upwards.
The Australian dollar continues to be whipped around, and there was significantly lower liquidity in the USDAUD currency pair with the US public holiday of Thanksgiving.
The Aussie dollar looks like it will extend its slide further down, possibly as low as 71 US cents in the coming days. A weaker Aussie dollar will boost the Australian dollar gold price
Did the Fed just confirm US inflation is running hot?
Driving gold down this week, is the suspicion the Federal Reserve Bank will begin to taper faster.
Several Fed governors have publicly commented on the need to taper quicker.
Tapering is tipped to increase from US$15 billion per month to US$30 billion per month as of January 2022.
An announcement on tapering is expected from the Fed at their 14-15 December meeting.
New Year brings tapering AND tightening says Goldman Sachs: The Fed will look to increase the pace of tapering in January next year, says Goldman Sachs, as well as brining forward a rate hike, with the investment bank writing to clients:
‘The increased openness to accelerating the taper pace likely reflects both somewhat higher-than-expected inflation over the last two months and greater comfort among Fed officials that a faster pace would not shock financial markets.’
Tapering, then tightening will drive the US dollar higher: The Fed appears to be spooked by October’s inflation print, hence the openness to ending stimulus and increasing rates sooner than expected:
Quicker tapering followed with tightening are supportive for the US dollar.
The more taper-and-tighten talk there is, the stronger the Dollar Index rally will become, reaching 97.50 looks plausible.
A stronger US dollar will keep gold on the defensive side of the trade, but with gold reaching key technical levels it shouldn’t spell bad news for spot gold.
Inside our office this week…
When the gold price dips, everyone comes to our doors! Our Black Friday sale has only just started (get in quick before the premiums go back up on Monday!) however this week we’ve packed and sent a variety of bullion orders.
Our 1oz ABC Platinum Minted Tablets have been extremely popular. Though that’s not surprising given the price dipped this week.
In addition, many investors have picked up a 50g ABC Bullion Gold Cast bar, and even added a 10oz ABC Bullion Cast Silver bar at the same time.
Before you go…
Have you subscribed to our YouTube page? Make sure you do. Next week, late Monday night I’m going to be interviewing Ronald-Peter Stöferle from Incrementum, the company that produces the incredible annual ‘In Gold We Trust’ reports. Ronald is one of the most respected gold analysts’ in the world. I can assure you, this is one interview you won’t want to miss.
Until next time,
Shae Russell
Group Communications Manager,
For ABC Bullion