Gold has been experiencing a rise in price during these challenging times, driven by market sentiment surrounding the global outbreak of COVID-19. The fluctuation of gold prices has been notable, with intraday trading ranging nearly $30, moving between 1662 and 1633.
According to Wolfe, a reputable financial firm based in New York, gold prices reached an all-time high across all currencies last week. Experts from AllStarCharts, a financial technology analysis website, suggest that gold prices are expected to remain elevated as long as dollar-denominated prices stabilize above the 1560-1600 level. In order to surpass the nine-year high of 1900, gold would need to climb an additional 19 percent.
The U.S. Commodity Futures Trading Commission (CFTC), a leading Futures trade group, provided data indicating a significant increase of 22 percent in long positions held by large speculative firms in the most recent week. TD Securities argues that while gold remains in crowded trading mode, ongoing uncertainty and a desire for risk aversion drive investors to continue buying.
The factors contributing to the higher price of gold extend beyond the impact of the outbreak itself. The recent flattening of the yield curve suggests market anticipation of further rate cuts by the Federal Reserve, providing additional incentives for bullish investors.
As downside risks to the global economy persist, central banks worldwide have embarked on a new round of monetary easing. The Chinese government, in particular, has injected 1.2 trillion yuan into the market through the central bank and implemented tax and fee reduction measures.
In summary, experts anticipate gold reaching its target price structurally when global central banks face real interest rate compression and inflation consistently falls short of the target. While the impact of the outbreak is temporary, the pessimistic outlook on the global economic situation remains a significant factor driving investors to seek risk-averse options.
Philip Streible, the chief market strategist at Blue Line Futures, believes that once gold gains another $50, traders with short positions will quickly sell out. Unless there is a new economic hotspot that can swiftly impact the global economy, gold, as a trusted currency anchor that has been relied upon for thousands of years, is likely to be favored by investors as a primary option for capital hedging.
Considering the potential for gold to reach $1,750 in the short term, it would undoubtedly be a surprising development in the market.