COMMENTARY – Gold poised for strongest week since 2008

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By David Brough

March 27, 2020 – Gold prices were poised for their best week since the height of the financial crisis in December 2008 and appeared well-positioned for further gains due to a weakening of the U.S. dollar.

A leap in U.S. unemployment filings raised hopes for more stimulus measures to combat the global coronavirus-fuelled emergency, potentially supporting bullion further.

The latest weakening of the dollar following the poor U.S. unemployment data could underpin the dollar-denominated yellow metal.

Spot gold, which was up more than 8 percent so far this week, was down 0.38 percent at $1,619.92 an ounce on profit-taking on March 27, 2020.

The gold price could rise toward $1,800 an ounce in the not too distant future, according to strategists at TD Securities.

 

COMMENTARY – Gold poised for strongest week since 2008

 

Equity markets, which recovered sharply this week, risk further falls as the gravity of the crisis continues to sink in, with U.S. coronavirus cases now exceeding the total in China.

President Trump’s assertion that he hopes to get America back to work again by Easter may be optimistic in view of the current rate of increase of coronavirus cases in the world’s biggest economy.

“Physical gold (and silver) seem to be pretty well unobtainable at the moment without the payment of exorbitant premiums,” wrote Lawrie Williams, a gold market columnist for bullion dealer Sharps Pixley.

“Indeed the physical price of gold bullion, if one adds in the premium, seems to be thus distancing itself from the spot price asset in the futures markets.

“If gold gets into a really short squeeze position given the high level of shorts in the futures market, the price could really take off.”

Gold’s appeal as a safe-haven asset seems back to be in force, although bullion risks selloffs to meet margin calls if other assets such as equities slide.

Disclaimer: Any opinions expressed in this article are solely those of the author and should not be seen as investment advice.

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