On Monday (May 18) in the sub-market early trading, the international spot gold suddenly accelerated sharply, has risen 20 dollars since the day low, once again broke through the previous high, approaching 1760 dollars/ounce to 1759.90 dollars/ounce, the highest level since October 2012, expanding to more than 1 percent on the day. Meanwhile, spot silver traded above the $17 level for the first time since March 11, rising 2.35 percent on the day.
In his latest comments, fed chairman colin Powell said the central bank had not run out of ammunition and could do more if needed. The fed can expand existing programs or add new ones, and can increase the size of its asset purchases as needed.
Mr Powell said the strength of the us economy after the outbreak would depend on keeping households solvent, with businesses and households likely to need “three to six months” of additional financial assistance to avoid bankruptcy.
“I and members of the FOMC continue to believe that negative interest rates may not be an appropriate or useful policy for the us,” Mr Powell said. The economy can start to improve “very soon,” but a full recovery from the outbreak will require confidence.
Mr Powell pointed out that us GDP could “easily” shrink by 20-30 per cent in the second quarter. Both the federal reserve and congress have more work to do to deal with the economic impact of the outbreak.
Mr Powell added that forecasts of “a peak unemployment rate of 20-25 per cent” were broadly correct and that the baseline forecast of a rise in the unemployment rate in June was reasonable, but that it would fall in the second half of the year.
Gold got a big boost from Powell’s latest comments suggesting the federal reserve could increase monetary stimulus. Gold has tended to benefit from extensive central bank stimulus because it is widely seen as a hedge against inflation and currency depreciation.
Markets this week will focus on Powell’s testimony before the senate banking committee on Tuesday. In addition to Powell’s testimony, investors will receive minutes of the FOMC meeting on Wednesday.
Last week, financial markets were enveloped in an atmosphere of risk aversion, as the global COVID-19 outbreak continued to spread, and fears of a second wave returned. At the same time, the economic impact of the epidemic has gradually emerged, with major countries reporting weak economic data. To make matters worse, the global trade situation has become increasingly tense in the wake of U.S. President Donald trump’s claim to impose a “digital tax” on Europe, and the European Union has shown no sign of weakness. And the current sino-us trade relations also further increase the uncertainty.
Affected by these multiple factors, global markets are clouded, investors as a whole still tend to seek safety. The traditional safe-haven precious metals are certainly in demand, and gold bulls continue to burst. Gold rose strongly for the fourth session in a row, hitting a fresh seven-and-a-half-year high to $1,751.30 an ounce on Friday, up more than $40 a week, or about 2.4 percent. Silver, meanwhile, rose even faster, rising as much as 5 percent to close around $16.60 on Friday, up nearly 8 percent for the week.
In terms of the global epidemic, Worldometers world real-time statistics show that as of 7:02 on May 18, Beijing time, the global total number of confirmed covid-19 cases exceeded 4.798 million, reaching 479,8119, and the total number of deaths exceeded 316,000, reaching 316,507. The United States has the highest number of confirmed covid-19 cases in the world, with more than 1,526,000 cases and 1,526,800 cases, and more than 90,000 deaths, with 90,973 cases.
There are now more than 100,000 confirmed cases in 10 countries: the United States, Spain, Italy, France, the United Kingdom, Germany, Turkey, Russia, Brazil, and Iran. Among them, the United States suffered the most serious epidemic, with more than 1.5 million confirmed cases of a novel coronavirus, accounting for nearly one-third of the confirmed cases worldwide. The number of deaths has risen to more than 90,000, accounting for more than a quarter of all deaths worldwide.
We need to keep a close eye on the latest developments in the global outbreak, and fed chairman colin Powell will make frequent appearances this week. We also need to keep a close eye on the uncertainties in the china-us trade situation. Most investment Banks and institutional analysts expect a bigger burst of gold bulls this week.
Golden aftermarket outlook
FXTM market analyst Han Tan said it will only be a matter of time before gold reaches the $1,800 level.
“The coming months remain fraught with downside risks and the threat of a cooling of us-china relations, which will only further dampen global risk appetite in the context of this global pandemic,” Tan wrote in a report. Gold’s next path of least resistance is still to the upside, so it’s only a matter of time before it hits $1,800. There are still many potential positive catalysts for gold prices, including increased trade tensions between the us and China.”
Phillip Streible, chief market strategist at Blue Line Futures in Greenwich, Connecticut, said if U.S. stock funds experience further outflows, they could even hit their $1,800 target in the coming week. “Gold seems to be starting to gain some momentum and we should continue to see investors piling in.
Adrian Day, chairman and chief executive of Adrian Day asset management, said: “there is no doubt that gold’s momentum is gaining as more and more investors see gold as the only option under the unlimited quantitative easing policy.”
“I’m bullish on gold next week,” said Kevin Grady, President of Phoenix Futures and Options LLC in Stamford, Connecticut. Massive global stimulus by central Banks should push gold higher. This low interest rate environment will continue for some time, which is also positive for gold.”
Daniel Pavilonis, senior commodities broker at RJO Futures, said gold should rise further in the coming week, especially as the dollar weakens. In addition, silver is now starting to outperform gold, and silver’s strength may also spur more buying interest in gold.
Mark Leibovit, publisher of VR Metals/Resource Letter, suggested gold could fall back. “Despite the bullish sentiment, I still think the market is vulnerable to a correction and remains short term. Cyclically, late summer should provide an entry point.”
Colin Cieszynski, the chief market analyst at SIA Wealth Management, said market activity was likely to be subdued as the next week and a half marked by public holidays in several countries and he was neutral on gold prices this week.