International spot gold traded at $1,619.00 an ounce in Asian morning trading on Monday. On the day, gold prices maintained the trend of volatile finishing, early shock fell to $1608.60 / oz, from the day’s high fell more than $12, then the bulls fought back, from the day’s low some rebound, now temporarily narrow finishing trading.
Gold rallied in the last session, rising for a third straight session, as dismal U.S. nonfarm payrolls data amplified the economic impact of COVID 19, but gains were capped by a stronger dollar.
Us employers shed 701,000 jobs in March, ending the longest streak of job growth in 113 months, a report said on Friday, as tough measures to contain an outbreak of novel coronavirus led to the closure of shops and factories and confirmed the economy had slipped into recession.
According to Fxstreet analyst Haresh Menghani, the march nonfarm report involved a period prior to March 12, when no major U.S. state had initiated a blockade, and the market reaction was fairly muted, with little meaningful impetus. The move comes after the job market was hit hard by the spread of the disease in the us. The United States lost 10 million jobs in two weeks, an unprecedented rate and scale.
As fears of a global recession mounted, demand for the dollar intensified, strengthening against a basket of currencies.
Edward Moya, senior market analyst at broker OANDA, said gold remained in wait-and-see mode, waiting to see how badly the global economy would be hit and how long depression-like conditions would last.
“We believe gold is likely to continue to play an important role in investor allocations in the coming months given the current turmoil,” ED&F Man Capital Markets analyst Edward Meir said in a note. However, volatility will remain quite high.”
But gold analyst Tyler Durden warned that the metal had not run out as some had predicted, and that those who may have never been involved in the larger international gold market were understandably unaware of its life cycle and real-world challenges.
Tyler Durden added that the new gold would add only 1 percent a year to the total gold supply. The remaining 99 percent already resides in large warehouses, jewelry and homes around the world. The laws of supply and demand also drive the 99 percent. If gold is not available, it is because the current owners think the price is too low, or people just don’t want to trade gold for a weak euro or dollar. So there is reason to think that the gold market will return to normal once the outbreak fears reach their peak, factories open and air traffic returns to normal.
David Madden, chief analyst at brokerage CMC Markets, said a more robust dollar would normally dampen gold’s performance as the metal is priced in dollars, which has not been the case in the past two sessions. As gold was generally pushed higher after initial reports of spectacular gains in the U.S. region, it appears traders are continuing to buy gold assets in the face of a potentially worsening economic backdrop.
Crude oil market “drama” repeatedly morning oil prices suddenly plunged more than 10%
Crude prices fell sharply in early Asian trading as the postponement of a meeting of major oil producers to discuss output cuts raised doubts about whether a deal could be reached. Brent crude futures fell as much as 12% in early trading, after rising nearly 14% on Friday. At the same time, the day’s decline in WTI crude oil also extended to more than 10%. Both U.S. and U.S. have rebounded modestly from their lows.
OPEC +, which includes Russia, will meet by teleconference on April 9 instead of Monday after fresh disagreements. Saudi Arabia and Russia have indicated they want the United States to join the deal, but President trump on Saturday lashed out at OPEC and threatened to impose tariffs on foreign oil.
Oil prices have continued to sell off furiously since Saudi Arabia launched a crude price war. Last week, however, the price of oil hit back, with brent crude and U.S. WTI crude jumping more than 30 percent, the biggest weekly gains on record, seemingly due to trump and the emergency meeting of OPEC +.
A video conference scheduled for Monday between the organization of petroleum exporting countries and its Allies has been postponed amid growing tensions between Saudi Arabia and Russia, CNBC reported Saturday. The meeting is now “likely” to take place on Thursday, sources said.
Saudi aramco, the state-owned oil producer, delayed the release of its may price until Thursday to see how the meeting might turn out, according to people familiar with the matter. However, the international energy agency said the biggest production cut in the oil industry’s history would not be enough to stabilise the crude market, whose demand has been hit hard by coronavirus. “The chances of reaching an agreement are extremely low.” “Said Daniel Hynes, senior commodity strategist at anz. “Given the shock to demand, the kind of agreement needed to stabilise the market is certainly out of reach.
The oil market has been the focus of investors’ attention recently, and how OPEC, Russia and the us respond to the next production cut will directly affect the market’s risk sentiment.
News of a possible shutdown of U.S. oil production in the gulf of Mexico came despite White House economic adviser frank kudlow saying the United States could not order a cut in production at U.S. oil companies. But sources said the trump administration has discussed forcing a shutdown of crude oil production in the gulf of Mexico as a novel coronavirus spreads among workers on an offshore platform. It is unclear whether the government is seriously considering the proposal. If all oil production in the gulf of Mexico were stopped, us production would be cut by 2m b/d.
Over the weekend, the positions of oil-producing powers Saudi Arabia, Russia and the United States remained sharply divided over how to address the growing supply glut and flood the market. A month-long price war between Saudi Arabia and Russia has sent oil prices tumbling from $65 to $30 a barrel.
Rabobank argues that a concerted global cut in output has been a strong support for oil prices, and that in fact there has been a cut. The decline in crude supply may depend on whether non-opec countries participate in the production cuts. Oil prices are expected to rise in the short term if a global agreement is reached to cut production.
According to the bank, oil prices follow two distinct trajectories as the price war progresses. As the prospect of an abrupt end to the oil price war grew this week, Saudi Arabia called for an emergency meeting of global producers that the market would soon find out what happened. It should also be noted that the main interest of speculators at the moment is short selling, momentum traders and arbitrage strategies. The shorts are likely to recoup much of their early gains if global production is cut, but much depends on the extent to which demand losses related to the novel coronavirus pandemic in the U.S. and Europe recover in the coming weeks and months.
If the oil price war “dies down”, risk aversion will cool sharply and safe-haven assets such as gold could sell-off.
Golden aftermarket outlook
BNP Paribas expects Gold to peak at $1,675 this year, with the second quarter likely to be its best. In spite of the outbreak forcing BNP Paribas to raise its 2020 gold forecast by almost $100, the bank still believes gold will peak at $1,675 this year.
The bank’s forecast for gold is fairly conservative, with an average of $1,675 in the second quarter, $1,610 in the third quarter and a further decline to $1,550 in the fourth quarter. According to the bank’s forecasts, gold will average just $1,500 an ounce in 2021.
Credit Suisse is bullish on gold for the long term, maintaining a key support area of $1446 to $1452 an ounce after returning above its 200-day moving average. The bank thinks gold could break through $1,921 an ounce, a new record.
“With all the stimulus money, zero interest rates, unemployment and a lot of battles on the economic front, I don’t think it’s possible for gold to go higher over the next week,” said Bob Haberkorn, a senior commodities broker at RJO Futures.
Charlie Nedoss, the senior market strategist at LaSalle Futures Group, expects gold to continue rising after testing and holding its 10-day and 20-day moving averages. And it expects the dollar to come under pressure and gold is starting to find its footing.
Richard Baker, the editor of the Eureka miners report, expects gold to target $1, 680 and silver to target $15. Gold has risen to $1,700 three times since late February but has not been able to stay above that level. Baker noted that the strength of the dollar index has driven the market’s on-again, off-again unwinding.