At the beginning of yesterday's trading, gold prices continued the downtrend correction. The selling pushed the prices to $1862 an ounce, and with the intense fluctuation, the gold price quickly rose to the $1950 before settling around $1915 at the beginning of Thursday's trading. The recent performance of the yellow metal was possible, and we indicated that the highest gains in its history towards $2073 an ounce must be followed by profit-taking selling, as the technical indicators have reached sharp overbought areas. The strength of the US dollar, global stock market gains, and the Russian announcement of a vaccine that eliminates the Coronavirus were all factors that supported the recent correction.
Gold prices rose to its highest levels ever during the summer, as the yields on US bonds became negative and continued to decline. Therefore, the sudden increase in yields over the past two days along with the strength of the dollar contributed to the rapid collapse of gold’s gains. Gains’ factors are still in place, which means that the yellow metal still has a chance to rise as long as it is stable above the $1900 resistance. Yellow metal prices fell 4.6% on Tuesday, which is the largest one-day drop since April 15, 2013, and the largest percentage drop since March 13 this year. In the same performance, silver fell to $25.97 an ounce, after the white metal fell by 11% in the previous session, to record the largest daily drop since September 23, 2011 and the largest daily decline in percentage since last March.
Data results revealed that the US Consumer Price Index rose in July for the second month in a row. Before that, the British economy was reported to have collapsed in the second quarter by the largest amount ever, in the worst slowdown of any advanced economy during the epidemic, and the UK's GDP drop on a quarterly basis of -20.4% in the second quarter was worse than France and Spain that were hit hard. It was almost twice the decline of - 10% in the United States and Germany during this period. The decline of -20.4% was slightly better than the forecast decline of 21.2%. The British economy began to recover in June as shops reopened, factories began to increase production and home construction continued.
On the COVID-19 front: The number of confirmed COVID-19 cases worldwide has risen to more than 20.3 million as of Wednesday and the number of cases in the United States has exceeded 5.15 million, as Florida and Georgia reported a record number of deaths in one day. There were more than 1,300 deaths in the United States on Tuesday, according to data compiled by Johns Hopkins University. Florida counted 276 deaths on Tuesday, according to the Florida Department of Health, beating the previous record of 257 on July 31.
According to the technical analysis of gold: I still prefer to buy gold from every downward level despite the recent collapse, as the factors of its recent gains to highest levels in history are still present, which are Coronavirus, US/Chinese tensions and political anxiety with the upcoming US presidential elections and continued economic stimulus by global central banks and governments to confront the pandemic. The closest support levels to buy gold are now 1890, 1863, and 1838, respectively. On the upside, the 1900 resistance is still strong support for the bulls to push gold to new record and historical highs.
Gold price will interact today with the release of Australian employment numbers and the number of US jobless claims.