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Pressure grows on gold amid Bitcoin upsurge

Fawad Razaqzada Fawad Razaqzada 19/11/2020 Linkedin Twitter
Pressure grows on gold amid Bitcoin upsurge Pressure grows on gold amid Bitcoin upsurge
Pressure grows on gold amid Bitcoin upsurge Fawad Razaqzada Fawad Razaqzada Linkedin Fawad Razaqzada Twitter
The short-term outlook for gold is becoming increasingly grim, even if prices haven’t collapsed yet. Gold has struggled each time a new breakout attempt has been ever since peaking at $2075 back in August. But while the short-term outlook looks bleak, the longer-term outlook hasn’t changed much in my view.

In recent times, gold buyers have been evidently abandoning the precious metal in favour of other, riskier, assets:

 
  • Bitcoin, for example, has been surging higher over the past few days as it continues to become increasingly popular as an alternative to fait currencies. Some even regard it as a better store of value than gold because, unlike the precious metal, the supply of the digital currency is fixed and running short as more and more investors get their hands on it.
  • What’s more, with the recent vaccine developments, we are hopefully heading to more normal times ahead and so appetite for haven assets have fallen, as too have expectations for further monetary easing in 2021. Investors are therefore warming towards value stocks instead.
  • Underscoring the reduction in appetite for fold, the world’s largest gold-backed ETF – SPDR Gold Trust – saw further outflows yesterday to the tune of 7.3 tonnes following an outflow of just over 9 tonnes the day before.
 
While the short-term outlook is becoming increasingly negative, the long-term outlook remains bullish. Gold will likely remain supported in the long term as physical purchases increase over time with a rebounding world economy, especially in places such as China and India where jewellery demand could pick up the most. While further interest rate cuts are becoming increasingly unlikely – as rates are already very low and there is the potential for the world economy to slowly recovery and for inflation to pick up – monetary policy is unlikely to be tightened too quickly in any case. This will prevent bond yields from rising rapidly, keeping noninterest-bearing assets like gold and silver supported.

With that said, and judging by recent price action, the pressure is growing for at least a short-term breakdown below key support in the range between $1848 and $1863. If that happens, the floodgates could open, leading to a potential drop to the next key support area between $1800 to $1818:

gold vs. bitcoinSource: ThinkMarkets and TradingView.com
 
However, if gold manages to hold its own here or forms a false break reversal then the short-term bearish outlook would become invalidated.

In any case, a rise back above $1895 resistance would be a short-term bullish development. Longer-term, gold will need to break above the falling wedge pattern it has been stuck inside since the summer to turn decidedly bullish again.
Any opinions, news, research, analyses, prices or other information contained on this website is provided as general market commentary and does not constitute investment advice. ThinkMarkets will not accept liability for any loss or damage including, without limitation, to any loss of profit which may arise directly or indirectly from use of or reliance on such information.

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Meet our contributors
Mohammed Zidan
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Mohamed Zidan
Chief Market Strategist, Dubai

Mohamed Zidan is a chief market strategist in Dubai and CFA Level III candidate. He reports to London office and has more than eight years of experience focusing on Forex, Commodities, Indices and global economic developments as well as central bank policies and intermarket analysis. worked as FX Analyst, and Strategist in several different organizations and for various departments. He holds a bachelor’s degree from Cairo University in Egypt. Mohamed Zidan is a regular guest on several major TV networks such as; CNBC Arabia, Fran24 Arabic, Alarabiya , Dubai TV, Sama Dubai, Skynews Arabia, Saudi National News, and Egypt National news.

Zidan presents insight to the markets movements, holds open discussions and relays possibilities related to the world’s financial market and economies.

Mohamed Zidan has been invited as a guest speaker for several international seminars. Zidan provides daily and weekly outlook for the markets. His experience ranges from currencies, commodities, stocks and options. he applies a top-down, global macro approach combined with price action to generate trade ideas and anticipate the next move.

Victor Golovtchenko
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Victor Golovtchenko
Global Macro Analyst, Sofia

Victor Golovtchenko has been analysing and trading foreign exchange markets since 2004, and is actively involved in the online media space since 2014. His tenure as a Senior Editor at a major brokerage industry news outlet was followed with a breakthrough into the financial news space with the brand new TradeStar website.

As an affectionate macro-focused analyst, he has an integrated framework to look at financial markets as a whole, identifying gaps between currencies, stocks, bonds, and other asset classes to get a core complete picture of the macroeconomic environment.

Fawad Razaqzada
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Fawad Razaqzada
Market Analyst, London

Fawad is an experienced analyst and economist having been involved in the financial markets since 2010, producing market commentary and research for a number of global FX, CFD and Spread Betting brokerage firms. He leverages years of market knowledge to provide retail and professional traders worldwide with succinct fundamental & technical analysis. Fawad also offers trading education to help shorten the learning curves of developing traders.
 
His colleagues consider him an expert at reading price action on the charts. This together with his deep understanding of economics and fundamental analysis, and trading experience, puts him in a great position to forecast short term price movements. Fawad covers a wide range of markets, including FX, commodities, stock indices and cryptocurrencies and his comments are regularly quoted by the leading financial publications such as Reuters and Market Watch. In addition to ThinkMarkets, Fawad also provides analysis and premium trade signals on his own website at TradingCandles.com.
 
 

Carl Capolingua
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Carl Capolingua
Market Analyst, Melbourne

Carl has over 20 years' experience in financial markets and has held senior analyst roles at a number of financial institutions. Specialising in Australian and US stock markets in particular, Carl uses a top-down approach to assess the global macro picture before using both technical and fundamental techniques to select stocks. He regularly appears as an expert commentator on a number of media outlets throughout the Asia-Pacific region.
 
 
 

Mohammed Zidan
Mohamed Zidan
He has more than eight years of experience focusing on Forex, Commodities, Indices and global economic developments as well as central bank policies and intermarket analysis.
Victor Golovtchenko
Victor Golovtchenko
Victor Golovtchenko has been trading on the foreign exchange markets since 2004, and is actively involved in the online media space since 2014. His tenure as a Senior Editor at a major brokerage industry news outlet is followed with a breakthrough into the financial news space with the brand new TradeStar website.
Fawad Razaqzada
Fawad Razaqzada
Fawad is an experienced analyst and economist having been involved in the financial markets since 2010, producing market commentary and research for a number of global FX, CFD and Spread Betting brokerage firms.
Carl Capolingua
Carl Capolingua
Carl has over 20 years' experience in financial markets and has held senior analyst roles at a number of financial institutions.

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Any opinions, news, research, analyses, prices or other information contained on this website is provided as general market commentary and does not constitute investment advice. ThinkMarkets will not accept liability for any loss or damage including, without limitation, to any loss of profit which may arise directly or indirectly from use of or reliance on such information.
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