Gold Futures declines as risks recede – Charles Schwab

The December Gold contract has seen choppy trading action of late as prices have retreated from the high in August of $2,089 to levels around $1,940. Recent gains in the stock markets, the strengthening of the US dollar and developments in the treatment of COVD-19 have worked to curtail the bullish momentum of gold, per Charles Schwab.

Key quotes

“Stocks markets started the week on a positive tone as the FDA approved the use of convalescent plasma, which contains antibodies from recovered COVID-19 patients. Stock market bulls took the que to push the NASDAQ composite index and the S&P 500 to new record highs. Also bolstering stock market bulls is the generally improving trend in declining COVID-19 cases in the US. All to the detriment of gold bulls, as strength in the stock markets may lead to less demand for gold, a hedge used against the uncertainty created by the pandemic.”

“Those with a bullish view of gold have looked at weakness in the US dollar as a major catalyst for their case. Since the start of August the US Dollar Index has mostly stabilized and has seen sideways trading. Traders may want to look to a major break of resistance or support in the US Dollar Index to indicate the next move for gold.”

“Gold is seen as a hedge against inflation and Fed Chairman Jarome Powell is scheduled to deliver a speech at the virtual version of the Fed’s annual Jackson Hole conference on Thursday. In this speech Chairman Powell is expected to highlight the Fed’s approach to increasing rates as well as improving unemployment. Many analyst expect Powell to speak to ‘average inflation’ targeting meaning the Fed will allow rates to run higher if they have been lower for an extended time. A more dovish stance to interest rates by the Fed may give gold bulls a headwind.”

“Looking at the daily for December Gold (GCZ20), prices are under the 20-day simple moving average but above the 50-day SMA.  Short-term support appears to be in the $1915 area and traders may want to also look to the 50 SMA at $1,895.60 as additional support. Resistance can be found at $1939.00 and $1950.00.”