Gold prices are slightly lower today as risk appetite of trader and investor has been increased due to the significant gains we have witnessed in the global equity market and in crude oil prices today. The precious metal sector has also been pressured as reports came out that Major countries in Europe and North America are beginning to open up their local economies gradually. Germany’s highest court said today that the European Central Bank exceeded its powers by launching a massive quantitative easing effort in 2015, and ordered the German government ”to take active steps” against the program in its current form. This would be bullish for the precious metal sector in the long term as it once again raises serious doubts about the long-term sustainability of the European Union.
The coronavirus outbreak, which was first detected in China, has infected people in 185 countries. Central banks all around the world have slashed interest rates and injected trillions of dollars in order to prevent the economy from complete collapse. But with numerous countries have been put under strict lockdown, major industrial production chains and global economic activity have been brought to a halt. The IMF described the decline as the worst since the Great Depression of the 1930s. Although it said that the coronavirus has plunged the world into a “crisis like no other”, it does expect global growth to rise to 5.8% next year if the pandemic fades in the second half of 2020.
Fed purchased almost $2 trillion in Treasurys due to which the Fed’s balance sheet has reached a record of $6.6 trillion, up from $4.2 trillion in February. The Fed balance sheet has increased over twice the rate compared to the 2008 housing crisis. We have also seen the price of a barrel of West Texas Intermediate (WTI) turned negative for the first time in history. Deflation could become a very severe threat to the underpressure economy. We are already witnessing Inflation in the wealthiest countries collapsing at the fastest pace since the financial crisis, as the coronavirus outbreak sinks the world into the deepest recession. Too much money printing by the Fed could eventually lead to hyperinflation and could trigger a downward fall in the U.S dollar.
New unemployment figures reached 3.84 million last week due to the pandemic crisis. Consumer spending has been reduced significantly due to rising unemployment and uncertainty, which compose two-thirds of U.S. GDP. Chairman Powell stated that he sees consumer spending continually declining and called the current situation the worst crisis he has seen in his lifetime. Powell acknowledged that the US entered a recession. The Fed has already cut its benchmark fed funds rate close to zero and purchased almost $2 trillion in Treasurys due to which the Fed’s balance sheet has reached a record of $6.6 trillion, up from $4.2 trillion in February.
U.S-China trade war which has been the major geopolitical and macroeconomic factor for the precious metal sector could get escalated pretty quickly as Donald Trump threatens China with new tariffs.”We signed a trade deal where they’re supposed to buy, and they’ve been buying a lot, actually. But that now becomes secondary to what took place with the virus,” Trump said. “The virus situation is just not acceptable.”
Under the normal seasonality for gold, may usually is not a good month and tends to be bearish for the gold however we are not in normal seasonality conditions and even though we might witness slight correction in the gold prices it would be a mistake to try to capture an extra dollar or two at the risk of missing the next major move up. We’re looking at support around $1,630.In may we would also see many economies slowly begin to re-open however we believe economies re-opening will not have much of an impact on gold as It’s going to take much longer to unfreeze the economy than it took to freeze it. The possibility of the second wave of the virus is also imposing a serious threat for the world economy which could end up increasing the longer-term economic damage from the virus.
Implications on Gold
Gold tends to surge in uncertainty and there are lots of uncertainty that exist right now which could drive the prices of the precious metal sector substantially higher. We don’t know how this virus is going to impact our lives?.how long the shutdown will continue? What if the second wave of the virus emerges?. How fast can businesses re-open? will coronavirus change the world permanently? Those are just big unknowns right now which would be supportive for the sector. The statement released by Federal Reserve along with the statements made by Chairman Powell has also increased the bullish outlook for gold. Under the normal seasonality for gold, may usually is not a good month and tends to be bearish for the gold however we are not in normal seasonality conditions and even though we might witness slight correction in the gold prices it would be a mistake to try to capture an extra dollar or two at the risk of missing the next major move up. In may we would also see many economies slowly begin to re-open however we believe economies re-opening will not have much of an impact on gold as It’s going to take much longer to unfreeze the economy than it took to freeze it. The possibility of the second wave of the virus is also imposing a serious threat for the world economy which could end up increasing the longer-term economic damage from the virus. The uncertainty driven by the pandemic, the influence of COVID-19 on global markets, and the global expansion of central-bank balance sheets will ultimately be very positive for gold. We believe Gold could test $1740-$1760 zone and It wouldn’t take a whole lot to push gold up to $1,900.Although the long term picture for the yellow metal is extremely bullish, in the short term Gold needs to pull itself back above the $1700 soon in order to support the strong bullish sentiments. Major supports resides at $1657,$1600,$1550, and $1450.Breaking below the March low of $1450 would indicate the end of the gold’s bull market. However, with keeping the bearish aspect in mind we don’t think gold would fall significantly from the price it’s currently trading at and even though we might witness slight correction in the gold prices it would be a mistake to try to capture an extra dollar or two at the risk of missing the next major move up.
The coronavirus outbreak, which was first detected in China, has infected people in 185 countries. Central banks all around the world have slashed interest rates and injected trillions of dollars in order to prevent the economy from complete collapse. But with numerous countries have been put under strict lockdown, major industrial production chains and global economic activity have been brought to a halt. The IMF described the decline as the worst since the Great Depression of the 1930s. Although it said that the coronavirus has plunged the world into a “crisis like no other”, it does expect global growth to rise to 5.8% next year if the pandemic fades in the second half of 2020.
Fed purchased almost $2 trillion in Treasurys due to which the Fed’s balance sheet has reached a record of $6.6 trillion, up from $4.2 trillion in February. The Fed balance sheet has increased over twice the rate compared to the 2008 housing crisis. We have also seen the price of a barrel of West Texas Intermediate (WTI) turned negative for the first time in history. Deflation could become a very severe threat to the underpressure economy. We are already witnessing Inflation in the wealthiest countries collapsing at the fastest pace since the financial crisis, as the coronavirus outbreak sinks the world into the deepest recession. Too much money printing by the Fed could eventually lead to hyperinflation and could trigger a downward fall in the U.S dollar.
New unemployment figures reached 3.84 million last week due to the pandemic crisis. Consumer spending has been reduced significantly due to rising unemployment and uncertainty, which compose two-thirds of U.S. GDP. Chairman Powell stated that he sees consumer spending continually declining and called the current situation the worst crisis he has seen in his lifetime. Powell acknowledged that the US entered a recession. The Fed has already cut its benchmark fed funds rate close to zero and purchased almost $2 trillion in Treasurys due to which the Fed’s balance sheet has reached a record of $6.6 trillion, up from $4.2 trillion in February.
U.S-China trade war which has been the major geopolitical and macroeconomic factor for the precious metal sector could get escalated pretty quickly as Donald Trump threatens China with new tariffs.”We signed a trade deal where they’re supposed to buy, and they’ve been buying a lot, actually. But that now becomes secondary to what took place with the virus,” Trump said. “The virus situation is just not acceptable.”
Under the normal seasonality for gold, may usually is not a good month and tends to be bearish for the gold however we are not in normal seasonality conditions and even though we might witness slight correction in the gold prices it would be a mistake to try to capture an extra dollar or two at the risk of missing the next major move up. We’re looking at support around $1,630.In may we would also see many economies slowly begin to re-open however we believe economies re-opening will not have much of an impact on gold as It’s going to take much longer to unfreeze the economy than it took to freeze it. The possibility of the second wave of the virus is also imposing a serious threat for the world economy which could end up increasing the longer-term economic damage from the virus.
Implications on Gold
Gold tends to surge in uncertainty and there are lots of uncertainty that exist right now which could drive the prices of the precious metal sector substantially higher. We don’t know how this virus is going to impact our lives?.how long the shutdown will continue? What if the second wave of the virus emerges?. How fast can businesses re-open? will coronavirus change the world permanently? Those are just big unknowns right now which would be supportive for the sector. The statement released by Federal Reserve along with the statements made by Chairman Powell has also increased the bullish outlook for gold. Under the normal seasonality for gold, may usually is not a good month and tends to be bearish for the gold however we are not in normal seasonality conditions and even though we might witness slight correction in the gold prices it would be a mistake to try to capture an extra dollar or two at the risk of missing the next major move up. In may we would also see many economies slowly begin to re-open however we believe economies re-opening will not have much of an impact on gold as It’s going to take much longer to unfreeze the economy than it took to freeze it. The possibility of the second wave of the virus is also imposing a serious threat for the world economy which could end up increasing the longer-term economic damage from the virus. The uncertainty driven by the pandemic, the influence of COVID-19 on global markets, and the global expansion of central-bank balance sheets will ultimately be very positive for gold. We believe Gold could test $1740-$1760 zone and It wouldn’t take a whole lot to push gold up to $1,900.Although the long term picture for the yellow metal is extremely bullish, in the short term Gold needs to pull itself back above the $1700 soon in order to support the strong bullish sentiments. Major supports resides at $1657,$1600,$1550, and $1450.Breaking below the March low of $1450 would indicate the end of the gold’s bull market. However, with keeping the bearish aspect in mind we don’t think gold would fall significantly from the price it’s currently trading at and even though we might witness slight correction in the gold prices it would be a mistake to try to capture an extra dollar or two at the risk of missing the next major move up.