​Too Early to Short Gold Despite Demand Plunge

WikiFX News (19 Nov.) - The recent positive news on the Covid-19 vaccine has weighed on the gold price, dragging it down to as low as $1,870 on Wednesday. But the precious metal still holds upside momentum amid the global low-interest rates and the rising balance sheets.

Moderna announced this week that its vaccine was 94.5% effective against Covid-19. The key progress in the vaccine will lift the economy but punish gold because the yellow metal has been regarded as a hedge asset against the inflation.

According to Singapores non-oil domestic export (NODX) released recently, the country registered a 61% plunge in non-monetary gold shipments in October, reflecting a reduction in demand for investment gold.

Nonetheless, it‘s too early to short gold. Data from the Fed shows that the country’s balance sheet has a size of $7 trillion. Besides the Fed, global central banks have been growing their books rapidly with a potential increase of 30% this year, according to CrossBorder Capital.

The institution also stated that the rise in the gold price was just a matter of time as global governments and central banks continued to launch aggressive fiscal-stimulus packages, increase the money supply, and expand their balance-sheets and deficits.

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Chart: Gold Trend