Gold: Risks remain to the downside amid two key factors – HSBC

In the latest note, the HSBC analysts said that the risks remain skewed to the downside for gold amid two bearish factors.

• Gold Price Analysis: Lack of healthy support levels exposes XAU/USD to $1850 – Confluence Detector

Key quotes

“A surging USD and jump in US Treasury yields pulled the rug from under gold. 

A massive equity market rally showed that investors were increasing risk, which also weighed on gold.

The psychological relief and a shift in risk sentiment may still weigh on gold in the immediate term, possibly taking gold close to support at $1,800 per ounce. 

If the USD and US Treasury yields surge further, gold can come in under more pressure. 

The broader economic climate (such as high debt, likely defaults and vulnerable asset price declines) is still gold-friendly. The risk now is whether the pandemic worsens and how quickly a vaccine can be made available - assuming it does provide protection from COVID-19. The fiscal and monetary response to the pandemic globally will remain highly accommodative.

A Democratic administration with the commensurate likelihood of bigger fiscal stimulus packages to come will likely buoy gold. All this should continue to provide gold with a reason to go higher in the medium to longer-term.”