On Tuesday night, spot gold returned to the top of the $1,800 mark, rallying nearly $25 over the day’s low, up 1.58% on the day; spot silver rose 4% on the day. Silver T+D broke above 4900 yuan/kg, up 4.46% on the day.
As spot gold prices recovered, U.S. gold stocks were higher pre-market, with Kinross Gold and Barrick Gold up more than 3.5%, Cordelan Mining up 2.9%, Gold Fields up 2.3%, and Newmont Mining up 2.1%.
While gold was rallying, Bitcoin took a short dive, falling below $19,000 per piece, after once approaching the $20,000 mark. Bitcoin then rallied over $300 to $19,313.9 per unit.
OECD Downgrades Economic Forecasts for 2021
Earlier, the OECD lowered its forecast for global economic growth in 2021 to 4.2%, compared to 5.0%, and for U.S. growth in 2021 to 3.2%, compared to 4.0%.
Lawrence Boone, the OECD’s chief economist, said there is still much work to be done on the policy side. If there are problems with public health or fiscal policy, there will be a renewed loss of confidence and a gloomier economic outlook.
The OECD expects that restrictions and social distancing measures will be needed for most of 2021, and that governments will have to continue their financial support.
The speed of economic recovery depends on the effectiveness of vaccine rollout, with the global economy growing by 5% if rollout accelerates and by 1.5% if rollout slows.
In addition, continued outbreaks in multiple countries around the world continue to provide support for gold. The U.S. reached 1.1 million new infections last week, and areas such as California have once again begun closure measures, impacting expectations for economic recovery.
Harshal Barot, senior research advisor at Metals Focus, said that gold closed above the key $1,760 level in the previous trading day, which indicates a short-term recovery in gold prices.
He believes that gold and equities could return to a positive correlation as the market anticipates further monetary and fiscal policy easing.
Market participants will continue to watch Fed Chairman Powell’s testimony presentation before the Senate Banking Committee. In the case of a major easing, rising inflation expectations are positive for gold.
Downward pressure on the dollar is likely to intensify
In addition, the dollar index is also expected to support gold next. forexlive analysts believe that downward pressure on the dollar is likely to intensify as we enter December. There are good reasons for the dollar to weaken before the end of the year. Due to tax issues, the dollar tends to experience outflows in December and then inflows in January. This pattern has repeated itself over the past 50 years, and investors can quickly see outflows in December.
In December of the previous year, large U.S. corporations moved funds to subsidiaries to save on taxes. By January of the following year, the funds are back in the U.S. and the flow pattern is fixed. Therefore, this will cause the dollar index to fall further before the end of the year.
In addition to these seasonal flows, fundamental factors are also not favorable for the dollar. The recent surge in new cases of coronary pneumonia in the U.S. is undermining Wall Street’s hopes for a V-shaped recovery, according to Stephen Roach, a leading U.S. economist.
He said on Monday that the still-fragile U.S. economy could be further crippled as infection rates soar. He argued that the impact has also led to a sharp depreciation of the U.S. dollar, and that his concern is that the large budget deficit associated with the new cases of coronary pneumonia could lead to a current account deficit, which is even more ‘dramatic’ today.
His fears are not unfounded. Since the outbreak of the epidemic in March, the dollar index has fallen 10.5%. Since the beginning of the year, it has fallen 4.5%.
Roach pointed out that this is just the beginning, and the dollar will face more downward pressure later. The U.S. government needs to postpone new fiscal policy to ease the current difficult economic situation.
According to Roach’s expectations, by the end of 2021, the U.S. dollar will have fallen by 35% against other major currencies.
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