International spot gold was trading around $1,705 an ounce in early Asian trading on Wednesday. Gold continued to show a volatile consolidation pattern on the day, falling to $1700.60 an ounce earlier, then rebounded from that point and is now maintaining a small upward momentum.
With the global outbreak still under control, domestic cases in China showing signs of rebounding, the latest warning from a top U.S. infectious disease expert adding to market jitters, and the risk aversion still strong, gold bulls have the upper hand in the long/short split.
From 0:00 to midnight on May 12, 31 provinces (autonomous regions, municipalities directly under the central government) and xinjiang production and construction corps reported 7 new confirmed cases, including 6 local cases (all in jilin) and 1 imported case (in Shanghai), according to the national health commission. No new deaths; One new suspected case is a local case (in jilin province).
On Tuesday, the United States national institute of allergy and infectious diseases (NIAID), director of the White House coronavirus Anthony Fauci, director of special working group (Anthony Fauci) in the senate health committee warned that coronavirus in the White House in the recovery plan to set up some “checkpoint” satisfied before restart the economy may be “serious consequences.
The international spot gold sub-market rose as high as $1710.60 to $1,695.40 in the morning, and fell as low as $1,692.20 to close at $1,702.04, up $6.22 or 0.37%.
Meanwhile, June gold futures closed 0.5 percent higher at $1,706.80 an ounce on Tuesday.
Economists point to the huge demand shock to the global economy from consumers forced to stay at home. Some market analysts said gold could struggle in the near term as deflation fears dominate sentiment. At the same time, however, some analysts said any near-term decline would be a buying opportunity, as massive market intervention by central Banks and governments is expected to push up inflationary pressures.
Fauci warned of “serious” consequences if states crossed a “checkpoint” to reopen their economies
On Tuesday, the United States national institute of allergy and infectious diseases (NIAID) coronavirus, director of the White House task force Anthony Fauci, director of Dr (Anthony Fauci) in the senate health committee warned that coronavirus in the White House in the recovery plan to set up some of the “checkpoint” satisfied before restart the economy may be “serious consequences.
“As I have said publicly many times, we have laid out a guiding framework for how to open America again,” he said.
“Depending on the dynamics of the outbreak in a particular region, state, city or region, this will really determine the speed and pace of re-entry or re-opening… My concern is that if the dynamics of an outbreak are so large in an area, you don’t see a tapering off beyond 14 days, getting you into the first phase, “fauci said.
“If some areas — cities, states, or elsewhere — jump over these barriers, these checkpoints, and open too early without the ability to respond effectively, I fear that we will start to see small peaks that could turn into big outbreaks.”
Asked by senator Patty Murray (d., wash.) what would happen if those areas ignored “checkpoints,” fauci replied, “the consequences could be very serious.”
Novel coronavirus may worsen in the fall or winter, fauci said, and deaths from covid-19 in the United States may be higher than reported.
Fauci and three other senior administration health officials attended the hearing, the largest congressional hearing since the coronavirus crisis began. In his planned speech, fauci did not criticize the trump administration’s response to the pandemic, but instead highlighted the efforts of the national institutes of health to develop vaccines and other medical tools to combat the coronavirus.
“Hopefully our research efforts, as well as other public health efforts, will allow us to quickly end this terrible ordeal that we are all going through,” fauci said.
“The nih is focused on the development of novel coronavirus vaccines and therapies that are safe and effective, as well as sensitive, specific and rapid field diagnostic tests,” fauci said in written comments submitted to the committee. These efforts will improve our response to the current pandemic and strengthen our preparedness for the next inevitable new outbreak.”
Fauci said the administration has focused on several different vaccine candidates, using the hockey term “multiple field goals” to describe the increased chance of a vaccine being effective. In addition, if more than one vaccine is successful, it will help increase global vaccine availability, he said.
Fearing he might have been exposed to the coronavirus, fauci appeared by remote video. Several senators also took part in the hearing via video, including sen. Lamar Alexander (r., tenn.), the committee’s chairman.
“Economic concerns are still the number one issue,” said Peter Boockvar, chief investment officer at Bleakley Advisory Group. Despite the opportunity to reopen, they will move slowly. “There is an underlying concern that the economy will rebound in a slow fashion and we are still in a deep recession.”
“We are just beginning to understand what happened when these economies reopened,” said Megan Horneman, portfolio strategist at Verdence Capital Advisors. “The market is going to be in a state of uncertainty for some time until we get some more reliable data, a few weeks from now.”
Powell’s speech is coming! Negative interest rates are the focus
Coming up at 21:00 GMT, federal reserve chairman colin Powell will deliver a speech on current economic issues and the outlook for monetary policy.
At the same time, Mr Powell is bound to be asked about negative interest rate expectations. Analysts said the dollar could see a rally if Mr Powell’s speech reversed expectations of negative interest rates. In the event of a surprise, the dollar is set for a sharper sell-off.
The federal reserve recently played down the possibility of negative interest rates in the United States, with fed policy makers saying they would do whatever they could to ease an economy hit by a widespread lockdown aimed at slowing the spread of novel coronavirus, but probably not.
Golden aftermarket outlook
Craig Erlam, analyst at OANDA, said: “we are seeing a bit of dollar weakness, which is providing some support for gold. Overall, gold has barely budged. Gold continued to consolidate around $1,700 and has been doing so for several weeks. There is little sign that this will change any time soon.”
“Spot gold prices are consolidation above the $1,700 mark,” Carlo Alberto De Casa, chief analyst at ActivTrades, said in a note. “investors remain bullish on gold, but new stimulus measures are needed to get gold moving again.”
Jasper Lawler, head of research at London Capital Group, said the market ignored economic fundamentals and was driven by massive liquidity injections by the fed and the U.S. federal government. In this environment, it makes sense to own some gold. Gold is expected to hit a record high by the end of the year as the consolidation phase, currently around $1,700 an ounce, comes to an end.
Sean Lusk, co-head of commercial hedging at Walsh Trading, said: “the big moves are coming. This pattern is either extended upward or revised downward. I don’t think this will last long. The next few weeks should be interesting.” Lusk commented that gold could fall to just under $1,600 an ounce or rise to $1,827 an ounce.
Todd Horwitz, chief market strategist at BubbaTrading.com, wrote in a recent article that gold has again maintained its key level of $1,700 an ounce, even as it looks set to break down again today. Gold continues to be supported at the 1700 level, no matter how badly it is doing and no matter how many bears are ready to bet against it.
“After the jump, gold is basically in a pretty aggressive trading range, trying to hold on to $1,700 as people look to hit record highs in the future,” said Phil Flynn, senior market analyst at Price Futures Group in New York. The fundamentals of gold remain solid, with governments taking massive fiscal stimulus measures and central Banks adopting ultra-loose monetary policies. However, traders say gold is being held back by the strength of equities and the dollar.”