After suffering their biggest daily decline since black Monday in 1987, Asian stocks failed to sustain early gains and turned lower Tuesday, as fears of a new bout of pneumonia fueled fears of a recession.
Spot gold continued to follow the selloff in equities, with prices falling below the 1,500 and 1,490 levels for the day to as low as around $1,485, testing further the key 200-day moving average support.
Meanwhile, silver has fallen faster and more aggressively. Silver continued to come under pressure after last day’s heavy losses, falling more than 12 percent on the day to as low as around $11.76.
Silver fell more than 12 percent last day, briefly touching $11.76, its lowest level since 2009. Silver prices are sensitive to the economic cycle. In general, if the economy is in a recession cycle, silver will fall faster than gold, whereas if the economy is in an upcycle, silver will rise faster than gold.
Analyst Radomski pointed out that it is too early to say where gold will eventually fall, but given the way gold has reacted recently and its relationship to other markets, it could fall in the coming months. Silver is likely to fall too, and the gold-silver ratio peaking is unlikely to prevent silver from falling further.
As the outbreak continues to spread rapidly, precious metals have sold off along with the broader market, forcing some investors to sell assets to meet margin calls, analysts said.
“Selling to cash out is still the norm in the gold market,” said Ryan McKay, commodities strategist at td securities. This is similar to what happened during the financial crisis, when gold prices, along with equities, were at fairly low levels for several months.”
US President Donald trump said the us economy is likely to suffer a recession, but the priority is to control the spread of the disease.
The U.S. economy is set to contract sharply in late march and April as consumers and businesses cut spending, Goldman sachs said, in a short-term slump that could be officially recognized as a recession.
Economists at the bank wrote in a report on Sunday that the world’s largest economy would contract by 5 percent in the second quarter after growth fell to zero in the first quarter. They cut their full-year growth forecast from 1.2 percent to 0.4 percent, forecasting growth of 3 percent in the third quarter and 4 percent in the fourth quarter, with strong growth in early 2021.
The “evil cocktail” of the new coronavirus outbreak and aggressive action to contain its spread have pushed the global economy into recession, according to four former international monetary fund chief economists.
Given the lack of large-scale virus testing in the us, professor Danny Blanchflower of Dartmouth College said: “the worst is yet to come and I think consumer confidence will collapse.”
On the daily chart, after four consecutive days of gains, the U.S. index was hit hard on Monday, the federal reserve emergency rate cut continued to bring negative pressure, finally closed below 98, the U.S. index continues to hover around this level. On the technical side, the MACD red kinetic energy column expanded slightly, the RSI index hovered around 50, the KDJ random index rose above the 50 level, short or continue to oscillate.
On the 4-hour chart, the dollar index is currently trading around its 200-day moving average of 98.10 and is currently above its key 100-day moving average, with some support from safe-haven demand. From the technical point of view, MACD green kinetic energy column appears initially, RSI index hovering above 50, KDJ random index hit 50 level down, short or continue to find direction.
On the daily chart, silver collapsed completely last day, falling more than 12% on Monday, at one point testing its lowest level since 2009 at $11.76. Despite a late recovery, silver prices remained under pressure during the day, suggesting bears still had the upper hand. From the technical perspective, the MACD green kinetic energy column expanded sharply, RSI index and KDJ random index both hit oversold levels, and there is a possibility of stabilization in the short term.
On the 4-hour chart, silver’s decline was particularly pronounced, with highs and lows moving lower and lower. Last day, there was a free fall, reaching a low of $11.76 at one point. On the technical side, the MACD green kinetic energy column gradually weakened, the KDJ random index tried to rebound from the oversold level, focusing on the possibility of a short rebound.
fundamentals Positive factors:
1.US President Donald Trump said at a news conference on Monday that the us economy may be heading for a recession due to the outbreak of pneumonia, and the worst case scenario may be in July, August or later.
2.The s&p 500 fell about 12 percent, its biggest daily drop since black Monday 30 years ago, and came within 1.92 percentage points of triggering a second-order circuit breaker.
3.The s&p 500 VIX index, which reflects the degree of market panic, rose 33.6% as of 17:00 U.S. eastern time (i.e., one hour after the close of U.S. stocks), while options on all three indexes fell more than 10%.
4.The federal reserve abruptly cut interest rates to nearly zero on Sunday afternoon and launched a massive $700 billion quantitative easing program to deal with the impact of a new virus on the U.S. economy.
Fundamental negative factors:
- National economic adviser frank kudlow said Monday that the U.S. is ready to do whatever it takes. The us economy will face extreme difficulties in the second quarter, but refuses to call it a recession. More than $800 billion in fiscal measures, including possible payroll tax cuts, may be put in place to help the U.S. economy.
- Hubei provincial health commission: from 0 to 24 o ‘clock on March 16, 2020, 1 new pneumonia case was confirmed in the province, including 1 case in wuhan and 0 cases in other 16 cities and prefectures. There were no imported cases from abroad.
- The number of confirmed cases in South Korea continues to decline. A total of 8,236 new cases of pneumonia have been confirmed in South Korea, according to a report by Yonhap news agency.
4.US President Donald Trump has tested negative for the virus, his doctor said on Saturday.