International spot gold pulled back on Wednesday (March 25), hitting a high of $1641.50 an ounce before quickly falling back, and the U.S. market touched a low of $1596.40 an ounce, mainly due to the stock market rally on the day, gold’s safe-haven bid was restrained. At the same time, the number of new covid-19 cases in the Lombardy region of Italy showed a downward trend, which also helped to stabilize the market.
Prince Charles, 71, has tested positive for a novel coronavirus and is showing mild symptoms, “but other than that, he is in good health,” the guardian reported on March 25, citing the British royal family.
Spain has become the fourth country in the world to have more than 40,000 confirmed cases and the second highest number of deaths after Italy. The world health organization’s assistant director general said Italy could see the peak of the outbreak this week.
Former federal reserve chairman Ben bernanke said Wednesday that the economic stagnation caused by the coronavirus outbreak was more like a natural disaster than a great depression. Mr Bernanke predicted a “very severe” recession followed by a “fairly rapid” rebound.
Gold is the mouse in the bellows these days. On the one hand, when the stock market crashed, investors needed a lot of money to replenish their deposits, so they also sold gold to raise cash, which caused gold to plunge along with the broader market, even though safe-haven demand still supported gold. On the other hand, safe-haven buying was curbed as stocks rallied, limiting gold’s further gains.
But analysts at two Canadian Banks said the fed’s unlimited purchases of us treasuries and mortgage-backed securities were a potential “game changer” for gold and investors should take advantage of the downturn to buy the metal.
Goldman sachs reiterated its bullish stance on gold, publishing a research note entitled “the last time to buy gold”. In the report, Goldman sachs said the fed’s announcement on Monday of massive quantitative easing and other measures to support the economy and markets was a game changer.
The bank believes gold may be at an inflection point and is ripe for buying, and predicts it could reach $1,800 within 12 months.
U.S. Treasury secretary Steven mnuchin said the current round of monetary and fiscal stimulus around the world should help the world economy, and those G7 officials will work together to boost growth and protect jobs and businesses.
Of course, the low-interest-rate environment also serves as a backdrop for global market participants seeking alternatives to fiat currencies, so the outlook for gold is still promising.
However, starting at 12 pm Beijing time on March 24, gold prices at the world’s biggest banks began to look unusual – with extremely high spreads across the market, frequent interruptions in trading and different quotes from leading brokerages. To this, the mainstream analysis on the market thinks, the lack of liquidity and the rise of volatility is the main reason that leads to this point difference inflation. Some analysts also point to the precautionary measures taken by foreign exchange trading centers such as New York, as well as the shortage of physical gold and silver in the market.
After the federal reserve’s unprecedented unlimited quantitative easing program, gold has become difficult to buy and sell. Dailyfx says it’s too early to assume gold has started a major new bull run and should continue to be patient with market conditions. At the same time, due to the volatile gold prices and abnormal quotes, point spread, and other problems, before they return to normal, should try to avoid gold trading.
Technically, gold’s rally stalled before the March 11 close of $1,671.73. This forms the lower limit of a possible resistance band, defending this year’s high.
Intraday reversals are likely to prove less steep than gains in the current environment, with the intraday high of $1,597.88 hit on March 13 providing short-term support for the gold market.
Separately, Gold holdings at the SPDR Gold Trust, the world’s largest Gold ETF, rose 1.3 percent to 935.98 tonnes on Tuesday.
Mark Mobius, a partner at Mobius Capital Partners in New York, said he sees the recent global sell-off in oil and equities as a “pure pain in the market” as investors simply see cash as a safe haven.
However, he added, “I think it’s still the wrong thing to do. People should own gold. I think this is a good time to own gold.”
Margret Yang Yan, analyst at brokerage CMC Markets, pointed out that the recent moves in gold prices have been decoupled from fundamentals and from the safe-haven nature of gold.
Yan said investor sentiment remains fragile and cautious, and the idea that cash is king is well entrenched, leading to expectations that the market will remain volatile.