Gold prices plunge under pressure! US stimulus hopes and vaccination increase Bitcoin's safe-haven wave hits gold bulls

In a cautious market environment, gold prices continue to be under pressure below $1,700 and are struggling to recover. They are currently struggling around $1,685. Optimistic US data, hopes for a new stimulus bill and increased global vaccinations support the dollar's gains and put pressure on gold's recovery prospects. The geopolitical war between China and the United States has increased risks, but gold is no longer a refuge for investors. Instead, Bitcoin seems to have become a new favorite for investors to avoid risks, and continues to gain momentum to create a record-breaking rally.
As of 08:27 Hong Kong time before writing, the price of gold fell by 0.06% to US$1,685.
Fundamental analysis: US data and good vaccination have given strong support to the US dollar. As US vaccination and large-scale stimulus plans boost inflation expectations, the US 10-year Treasury yield has rebounded to 1.7, which is bound to remind investors of the pressure of high US debt in the past few weeks. The US dollar index also rose strongly, even hitting a four-month high of 93.35. Investors are still focusing on the new infrastructure plan to be announced by US President Biden.
Political strategists had previously predicted that Biden would soon introduce a tax increase proposal for individuals and businesses. According to the latest news from Politico, Biden will not use the rich tax to pay for the proposal. In short, Biden's infrastructure plan is waiting for new momentum and has not yet played a role in the trend of gold.
The US dollar has also become a safe haven for the US stock market. After the US hedge fund Archegos Capital was reported to have a margin call, the US stock market's technology stocks also performed poorly. The four major US stock indexes also closed slightly lower overnight, and the Dow Jones Index fell more than 100 points from its historical high. The high point of the US dollar may be attributed to the latest weakness of gold, while optimistic US fundamentals and risk aversion may be key factors in the strengthening of the US dollar.
As for the COVID-19 vaccine, despite the resurgence of the epidemic in Europe and Australia, vaccination continues to gain support. France, Germany and the United Kingdom are cooperating on vaccines amid fierce competition, while various countries and regions in Asia are showing a more positive attitude towards vaccines. Hong Kong and Taiwan have already launched vaccination programs, and Japan and South Korea are also taking action without stopping.
Fundamental analysis: Geopolitical war raises risks, Bitcoin becomes the biggest safe-haven winner. Bloomberg Intelligence looks ahead to April, showing that the stagnation of the gold bull market has lasted for some time, and Bitcoin may be the main culprit for the setback in gold prices. Mike McGlone, senior commodity strategist at Bloomberg Intelligence, said: "Old-school gold seems ready to compete with young Bitcoin. We believe that Bitcoin is transitioning to a long-term bull. Unless Bitcoin's higher prices reverse, cryptocurrencies will represent the biggest resistance to gold."
McGlone went on to point out that for many investors, Bitcoin is replacing gold's role in the portfolio, and before there is any change in this trend, gold will have to share its safe-haven focus with cryptocurrencies. He reiterated: "Unless gold unexpectedly rises and the upward trend of Bitcoin funds is curbed, we think the upside of gold is limited. The precious metal has lost its main support, which is the inflow of exchange-traded funds."
"Gold is more likely to be trapped in a cage marked by $1,600 to $1,900 an ounce. It would probably take something very dramatic to keep gold above its October highs above $1,900, but we think it's going to be a long hibernation," McGlone added.
Technical analysis:
With a clear downside breakout of the 21-day moving average at $1,720, gold prices are likely to break the monthly low of $1,676. A sustained move down to the May and June 2020 lows of around $1,670 would then start testing gold bears.