• MTS Gold Morning News 20200422

    22 Apr 2020 | Gold News
    



Gold slides, palladium plunges over 15% in scramble for cash

· Gold prices dropped nearly 2% to a near two-week low on Tuesday, while palladium slumped 15.5% as investors scuttled for cash to cover losses in other asset classes mainly driven by a crash in oil markets as the coronavirus wrecks economies.


· Spot gold slipped 1.3% to $1,671.68 per ounce, having earlier hit a low since April 9 at $1,659.68. U.S. gold futures settled 1.4% lower at $1,687.80.


· Palladium fell 9.5% to $1,958.00, having earlier fallen to $1,827.92. Platinum was down 3.3% to $745.29 and silver dipped 4.3% to $14.71.


· “Oil has really got the entire commodity complex down with it ... A lot of people are exiting positions that they were very profitable on with a wait-and-see attitude to see whether there’s further spillover from the energy into precious metals,” said Bob Haberkorn, senior market strategist at RJO Futures.


· Brent crude futures plunged 25% to the lowest in nearly two decades, a day after panicked traders sent U.S. oil below minus $40 per barrel on fears of a historic glut due to demand destruction by the coronavirus pandemic.


· The nosedive in U.S. crude prices and dismal corporate earnings reports ignited fears over lasting damage to the global economy from the pandemic, sending global stocks lower.


· Bullion has on occasion moved in tandem with equities recently, especially as sharp sell-offs in wider markets force investors to sell precious metals to meet margins calls and cover their losses.


· “The historic collapse in oil prices and rising fears over a severe global recession may create another dash for cash, essentially exposing gold prices to downside shocks as the dollar appreciates,” said FXTM analyst Lukman Otunuga.


“Although the unfavourable global macroeconomic conditions, chaos surrounding the coronavirus outbreak and gloomy outlook for oil markets could accelerate the flight to safety, gold may not be the first destination of safety for investors.”


· Gold, considered a safe store of value during political and financial uncertainty, has been facing tough competition from another safe-haven, the dollar, in which it is priced. A stronger dollar makes gold expensive for holders of other currencies.


However, a wave of stimulus measures by central banks to ease economic damage from the new coronavirus pandemic and inflows into exchange traded funds (ETF) are likely to keep gold supported, analysts said.


· Holdings in the SPDR Gold Trust, the world’s largest gold-backed ETF, are now at their highest in over three years.


· Gold to Reach $3,000—50% Above Its Record, Bank of America Says


Bank of America Corp. raised its 18-month gold-price target to $3,000 an ounce -- more than 50% above the existing price record -- in a report titled “The Fed can’t print gold.”

The bank increased its target from $2,000 previously, as policy makers across the globe unleash vast amounts of fiscal and monetary stimulus to help shore up economies hurt by the coronavirus.

“As economic output contracts sharply, fiscal outlays surge, and central bank balance sheets double, fiat currencies could come under pressure,” analysts including Michael Widmer and Francisco Blanch said in the report. “Investors will aim for gold.”

BofA expects bullion to average $1,695 an ounce this year and $2,063 in 2021. The record of $1,921.17 was set in September 2011. Spot prices traded around $1,678 on Tuesday and are up 11% this year.

To be sure, a strong dollar, reduced financial market volatility, and lower jewelry demand in India and China could remain headwinds for gold, BofA said.

“But beyond traditional gold supply and demand fundamentals, financial repression is back on an extraordinary scale,” the report said.

· Covid-19 to impact Akshaya Tritiya gold jewellery demand

While jewellery buying is generally spread throughout the year, it peaks during occasions such as Akshaya Tritiya, wedding and festival seasons as buying gold is considered culturally auspicious, said ICRA.

K Srikumar, Vice President, ICRA, said as the stores are currently non-operational, recovery in demand will likely be slow. Given that jewellery is a non-essential product and consumers typically defer their discretionary spends, jewellery retailers will witness sharp moderation in footfalls over the next few months, he said.

· Swiss Gold Exports to U.S. Jump to at Least Eight-Year High

Gold exports from Switzerland to the U.S. soared in March as American investors rushed to buy bullion amid the virus-driven panic.

Shipments to the U.S. from Europe’s biggest precious-metals refining hub rose to 43.2 tons, the highest in data going back to 2012, according to the website of the Swiss Federal Customs Administration. That was almost half of Swiss gold exports last month as deliveries to traditional destinations such as India and the U.K. dropped. There were no shipments reported to mainland China.

Reference: CNBC, Bloomberg, newsnow

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