Happy New Year’s Eve, traders. Welcome to our weekly market wrap, where we take a look back at these last five trading days with a focus on the market news, economic data and headlines that had the most impact on gold prices—and may continue to into the future—as well as the charts for silver, the US Dollar and other key correlated assets.
Gold prices are looking to close solidly higher, not only for the week but for the year, as spot markets at the time of writing are seeing another challenge of major resistance at $1900/oz. Meanwhile, silver prices have had an outstanding week of their own, having traded well above $26/oz since Sunday evening’s sharp surge higher.
As we suspected would be the case from Monday, this week’s market for lack of any other input has been dominated by reaction to the last-minute signing of the US government’s funding bill and a subsequent round of new fiscal stimulus measures for small business and consumers. Despite the number of questions and complications that still need to be addressed (and quickly,) investors have celebrated the news by pushing US equity prices higher for most of the week, starting with new record S&P highs on Monday. For the precious metals, the key component to the market reaction has been the US Dollar. The jubilation in equity markets has been part of a general rush of risk appetite and—perhaps partly due to a rosier 2021 outlook suggesting steadily higher demand for raw commodities—investors have rushed to pull their cash off of the sidelines rather than close positions in other safe havens. Gold (and silver, boosted in particular by improved demand outlooks,) has surged to the fore in the final trading days of 2020, as the Greenback has fallen sharply to 2.5-year lows.
As the final session of the year begins to wrap, gold is still experiencing resistance at $1900/oz while US stocks are softer thanks to end of month/year profit-taking and rebalancing trades.
Looking ahead, this week has made it clear that the first trading days and weeks of 2021 will be ruled by the next stage(s) of the narrative coming out of Washington; Specifically, the extra-time haggling around the amount paid in direct stimulus checks for the American people. With a boost to $2,000 (from $600) having easily passed the House, it has been gridlocked in the Senate with essentially zero hopes of movement before the weekend. I think this is a story that becomes generally destabilizing for market optimism the longer it drags out, and there seems to be little hope for resolution even next week; Midweek the US legislature will wrangle not only with the most absurdly contentious certification of a presidential election in the nation’s history, but also dual run-offs for Georgia’s senate seats which may well flip control of both houses and dramatically alter the fiscal outlook for 2021.
For now, I want to wish you all a very happy new year and to thank you for reading and watching with us across the absolutely wild year that 2020 has been both inside and outside of the markets. I hope that you and yours find the opportunity to celebrate the clear start safely, and are looking ahead to healthy and profitable 2021!