Spot gold was trading at $1,621 an ounce in Asian trading on Friday. On the day, gold maintained its pullback from the previous session’s high of $1,643.10 an ounce and is now trading in the $1,621 area.
Gold opened at $1, 615.38 an ounce in early Asian trading, touched as low as $1, 595.94 and rose as high as $1, 644.00 before closing at $1, 628.99, down $13.83, or 0.86 percent.
Meanwhile, COMEX gold futures for April delivery ended up $17.80, or 1.1 percent, at $1,651.20 an ounce after data showed U.S. jobless claims rose to a new weekly record of 3.283 million last week.
Kevin Rich, the global gold market adviser at The Perth Mint, said gold could face another historic rally in The future, especially given what The fed has done and The overall low-interest-rate environment.
“These monetary policies that the fed and other central banks are pursuing are similar to what happened in 2008,” Rich said. Over the next nine to 12 months, there could be an inflationary effect, which is good for gold.”
Rich explained that the pattern in 2008 was similar to today’s crisis, with stocks falling in 2008, gold prices falling, then the fed stepping in and gold prices rising, starting the historic gold rally of 2008-2011. He added: “there are parallels with the past.”
Unprecedented stimulus stack! Can’t hide us recession fears?
The $2 trillion economic rescue plan has rattled market nerves after the U.S. Senate agreed to an unprecedented stimulus package. And that’s not all. Thursday’s G20 meeting will launch another $5 trillion crisis plan.
G20 leaders held a special summit on the outbreak via video on Thursday; The g20 will launch a us $5 trillion economic plan to address the negative social, economic and financial impacts of the outbreak and support central Banks in their efforts to promote financial stability and increase liquidity in global markets.
The g20 said it would do “whatever it takes” to overcome the novel coronavirus crisis and on Thursday said it would inject $5 trillion into the global economy through national measures to mitigate its impact. In addition to the $5 trillion in targeted fiscal policies, economic measures and guarantee programs, the G20 has pledged substantial fiscal support.
At the same time, the G20 communique stressed that finance ministers and central bank governors of G20 countries will coordinate regularly, and a series of emergency action plans will be further determined at the ministerial meeting in April. The g20 pledged to work together to increase funding for vaccine and drug research and development, and to strengthen international cooperation in digital technology and medical science.
However, economists still believe the us economy is heading for a deep recession, with some forecasting the worst quarterly decline in the gross domestic product since records began in 1947. Containment has forced the world’s largest economy to shut down abruptly, forcing businesses to shut down and potentially putting millions out of work. The range of forecasts for GDP is wide, but most economists expect a rebound in the second half of the year following a severe decline in the second quarter.
Meanwhile, a surge in U.S. jobless claims on Thursday added to concerns. New claims for state unemployment benefits surged to 3.28 million from 282,000 the previous week, labor department data showed on Thursday. That is more than four times the previous record and beats the peak of 665,000 reached during the great recession and the previous record of 695,000 set in October 1982.
Jim Wyckoff, the senior market analyst at Kitco in New York, noted that despite strong gains in U.S. stocks, U.S. gold prices remained firm in midday trading on Thursday, driven by safe-haven demand and chart-based buying. Gold bulls were more confident this week to sell some of their cash and buy the precious metal, but they still see big waves ahead in the coming weeks and beyond. Traders and investors were quick to dismiss Thursday’s weekly jobless claims report.
Similarly, JPMorgan chase slashed its forecasts for us growth in the first and second quarters after a review of its epidemic prevention and stimulus measures over the past week. They expect the real gross domestic product to contract at an annual rate of 10 percent in the first quarter, compared with a previous forecast of a 4 percent contraction. A historic contraction of 25 percent is expected in the second quarter, compared with a previous forecast of 14 percent.
“When we cut our growth forecast last week, the consensus was that it was too pessimistic,” JPMorgan chief U.S. economist Michael Feroli and analyst Jesse Edgerton said in a report. It does look a little bit optimistic now. That’s how fast things are going.”
The report said the severe contraction was caused by a broad restraining order that widened the scope of damage to economic activity, and that the federal government’s stimulus package should only partially offset the current revenue loss, adding to the debt burden of the business sector. The growing divergence between the federal government and the states over epidemic control practices could undermine confidence in the institutions on which these market economies depend.
The bank also warned that even such a massive stimulus was unlikely to offset the impact of the new pandemic and the interaction between the outbreak and the economy’s already weak spots. Companies are still likely to be constrained by funding constraints in the coming months, limiting the speed at which hiring and capital spending can rebound. The blow to consumer confidence, the Labour market, and net worth are likely to last a long time.
Golden aftermarket outlook
TD Securities now expects gold to rise to $1,800 an ounce and jump to $2,000 by the end of the year.
On a technical level, Dailyfx wrote that gold has returned to its familiar “flinch” pattern before hitting key resistance, with the current psychological level at 1650. Gold is likely to test the upside again in the short term, but with its current downward momentum, the downside target is the support band that converged from the lows of early March and February. In the current environment, gold’s return to this support is probably just a good opportunity to go long, but those who want to do so must beware that the gold market still has downside risk at a time when investors need cash to cover losses elsewhere.
Todd Horwitz, the chief market strategist at BubbaTrading.com, wrote that gold has found the key level it must maintain, while silver and platinum have failed at their resistance levels. While the rally in precious metals has been strong, it appears to be over and they are now high. The next few days will tell us whether they are in the next upswing or whether the rally is just short covering and then further down. After hitting a high of $1,698 on Wednesday, gold futures for June found themselves under pressure and likely to resume their decline. If the $1,698 level is sustained, it would be a low high and a sign of falling gold prices. We are nervous about being long on gold, platinum, and silver and will stay there, but will remain so until our signal changes.
Samson Li, the precious metals analyst at Refinitiv GFMS in Hong Kong, said: “in the short term when equity markets fall, gold is likely to rise because it is a safe haven asset. However, if the sell-off continues, the fund may receive margin calls, so it needs to sell gold to raise cash. In the long term, with central Banks flooding the financial system with liquidity, there will be massive destruction of purchasing power in the future, which will be good for gold.”