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31 Mar 2020

Gold is a sitting duck for hungry bears, straddles a fragile 1600/50 range

  • Gold prices weak in a risk-on setting as investors see a light at end of tunnel.
  • Chinese PMIs to set the scene for risk appetite start of month. 

The price of gold has been consolidating a move int the 1600s, slightly lower today as markets overnight pounced back with a vengeance as investor begin to look through the virus and are seeing the light at the end of the tunnel. At the time of writing, gold is trading at $1,616.26, between a range of $1,615 and $1,626.55. 

In New York, North American stocks resumed their climb with a 3.4% advance in the S&P 500, adding to sizeable gains the prior week. Meanwhile, US Treasuries rose on a 5bp selloff in the 30-year, with 10-year yields moving higher by 2bps to 0.70%. 

COVID-19 and glimmers of hope

The better mood on the street comes as a slowdown in new COVID-19 in Europe, in nations including Italy, Spain and the UK providing some glimmer of hope that the lockdowns are taking effect. The US President Donald Trump, adamant that American needs to get back to work, warned that the worst was yet to come and to brace for a peak over the next two weeks taking extra precautions while extending the lockdowns through to mid-April. 

"In precious metals, the scramble for dollars appears to be easing as the Fed's extraordinary measures and central bank FX lines help to supply the global market with dollars," analysts at TD Securities note:

"Indeed, gold holds the highest beta to pandemic sentiment in our cross-asset basket, underscoring that the recovery in prices coincides with a period of subsiding fear. In this context, we have cautioned that gold has performed poorly as a hedge against the virus' sharp deflationary impulse, as real rates surged in response, but we argue that the complex will perform smartly in the next phase of this narrative."

Meanwhile, for today, a possible market mover will be in the release of China’s PMI for March while will set the tone for commodity markets, more on that here: China's PMIs Preview: Enjoy those blue skies while you still can, manufacturing is back

Gold levels

 

 

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