Gold is falling this week on more positive news about the vaccines, this time coming from the UK. British-Swedish pharma giant AstraZeneca announced that the vaccine they’ve developed in collaboration with Oxford University has proven successful in preventing COVID-19 in 70-90 percent of trials. Furthermore, the required temperature for storing their vaccine is much more practical compared to the Pfizer vaccine.

 

 

The positive developments with the vaccines suggest that more downside is likely in the precious metals in the near-term. However, the long-term outlook remains bullish. The main reason behind it being the massive fiscal and monetary stimulus that governments and central banks unleashed on the world to alleviate the economic shock from the COVID-19 pandemic. Not only that none of this money will go away, but political leaders have pledged to provide even more money printing and stimulus next year to support the economy during the recovery phase. With so much freshly printed fiat money in the system, it’s hard to imagine Gold and precious metals in general not trading higher over the coming months and years. The outlook for Gold, therefore, remains strongly bullish on a long-term horizon.

 

The weekly chart shows us that the correction is underway and has scope to extend lower. The bullish trend that started in March was broken and has taken the price to the $1,800 area. This is a strong support zone, both due to the 2011-2012 highs that stand in the same area (visualized on a monthly chart), and also because of the support trendline of the corrective channel (see weekly chart below).

 

Given this solid support in the $1,800 zone, it seems an imminent bounce in Gold is likely. However, any such bounce is probably going to remain only part of the correction, rather than being the start of the next major bullish run to new all-time highs. The overall situation suggests the correction needs some more time to go before it matures. Part of the reason for this view is the steep rise from March to August and the subsequent relatively steep rejection around the $2,070 highs.

 

If Gold rebounds here at $1,800, then the resistance areas to the upside where it could stop are $1,850 and $1,900. You may remember these price zones as former support areas when the metal was trading at prices above them.

 

Nonetheless, in a different scenario, if the $1,800 support breaks, then the road to the 55-weekly moving average and the $1,700 area will be clear, which would be the likely next destination in this scenario. There, in the $1,650 - $1,700 area, Gold is likely to encounter strong support and buying interest. It is this support area that is crucial to hold for the long-term bullish dynamics to remain in place. 

 

 

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