The pound is starting the week on the backfoot versus other major currencies. During the weekend fears grew over a second wave of the pandemic, with the country’s health secretary warning of a tipping point approaching and refusing to rule out a new national lockdown.
Meanwhile, trade negotiations with the EU continue to be under strain with the outcome remaining uncertain. These are challenging times for sterling and further weakness can be expected as the prospect of negative interest rates, an idea floated last week by Bank of England officials, becomes an increasingly realistic prospect.
Stocks are in red while the threat of new lockdowns increases. Despite this, gold isn’t finding any fuel for new rallies and the price is languishing, losing more than $10. Technically the scenario is unchanged, with a first support zone placed at $1,920, while we would have a major negative signal with a fall below $1,860.
Vice versa, a recovery above $2,000 could open space for a new jump, with the peak seen in August at $2,070 a potential target. Anyway, we should point out that bullion is not jumping despite the risk off scenario, confirming the positive (direct) correlation with indices we have seen in the last few months.
Carlo Alberto De Casa – Chief analyst, ActivTrades
Disclaimer: opinions are personal to the authors and do not reflect the opinions of LeapRate. This is not a trading advice.
