The market ended the week on a weak note after the US Congress failed to reach an agreement on a coronovirus-assisted package.
Last week, December Comex gold closed at $ 1960.90, $ 13.60 or + 0.70%. It was at a two-week low of $ 1911.70.
Essentially, the main influences on the price action were the decisions of the ECB and the US Congress. ECB President Christine Lagarde refused to indicate Thursday that the bank would extend the stimulus, while the US Senate blocked a Republican bill for new coronovirus assistance.
Gold has surged by 28% this year, largely supported by the stimulus by global central banks, with the precious metal considered as a hedge against inflation and currency debilitation. However, even though the ECB did not offer any incentives at this meeting, it left the possibility of additional incentives before the end of the year.
Nevertheless, the ECB news was enough to send the euro higher, move the US dollar index down and help support gold prices.
Another surprising news that helped weaken gold prices was that the US Senate blocked a Republican bill that would provide about $ 300 billion in new coronovirus aid.
It seems that wherever we look we see reasons for high prices and reasons for low prices. It is creating a rangebound trade.
COVID-19 points to gold near the development of the vaccine and improvement in economic data, while low and negative interest rates, a weaker US dollar and expectations for further stimulus balance the risk.
After a two-day meeting on 16 September, waiting for Federal Reserve announcements, we expect a very carefully watched statement. The Fed will have to demonstrate patience before raising rates as it waits for the economy to rebound. But there is bad news. If the economy needs more help, then there may not be so much ammunition left in its arsenal to stimulate the economy. Therefore, we expect Fed Chair Powell to target Capitol Hill and ask Congress to do more.
Bottom line: The Fed is not expected to say anything to gold.
For a look at all the economic events of today, check our economic calendar.