Is gold running out of gas?

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(Kitco News) – Although the gold prices have managed to bounce off November’s four-month lows, the sentiment is starting to shift in the marketplace again, and there is this growing feeling of apathy.

The market sentiment feels odd as traditionally, this has been an exciting time in the marketplace. Seasonally, gold has done really well in the final weeks of the year and the first half of the first quarter. Next week is the final full trading week of 2020, and gold prices are struggling to push above resistance at $1,850 an ounce.

The feeling of indifference in the marketplace is almost palatable. For example Thursday, the European Central Bank announced new stimulus measures. Yes, many analysts noted that what the central bank announced was fairly lackluster, but still, the gold market barely raised an eyebrow at the fact that the ECB doesn’t see the European economy recovering in earnest from the COVID-19 pandemic until the end of the year.

Meanwhile, the Brexit negotiations are breaking down with Prime Minister Boris Johnson warning that the U.K. might break away from the European Union without a trade deal in place. This is a significant international risk that the gold market is pretty much ignoring.

Gold investors also continue to digest November’s dismal performance. According to data from the World Gold Council, last month was the second-worst month on record for outflows in history. The WGC said that gold held in global exchange-traded funds dropped by 107 tonnes.

In more negative news, according to Kitco News’ Anna Golubova, the gold market is also having to contend with growing competition from digital currencies as bitcoin holds near record levels.

Some analysts have said that the gold market is in desperate need of new information. The precious metal will remain supported by strong fundamentals as the world deals with rising deficits and unpreceded liquidity pumped into financial markets. Analysts from Wells Fargo noted that markets got drunk on liquidity in 2020, and they aren’t expected to sober up in 2021.

However, how much of this information is already priced into the market. The market is waiting specifically for impending news of new government fiscal stimulus measures, and it appears they might have to wait until after the holidays to get it.

In this week’s gold survey, Ole Hansen, head of commodity strategy at Saxo Bank, might have the best advice for gold investors: “investors should just close their books and come back in January.”

That is it for this week. Remember to stay safe and healthy this holiday season.

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