Gold holds firm above $1,800 per ounce on virus fears, weaker dollar
· Gold prices rose on Monday, holding ground above the key $1,800/oz level, as a weaker dollar and worries over surging COVID-19 cases around the globe kept the safe-haven metal underpinned.
· Spot gold was up 0.3% at $1,803.80 per ounce by 0303 GMT. U.S. gold futures rose 0.4% to $1,809.10.
· “The COVID-19 narrative is not going away and (we) don’t think the U.S. Federal Reserve is going to change course on the rates anytime soon, which should support gold prices,” said Stephen Innes, chief market strategist at financial services firm AxiCorp.
The medium-term outlook for the economic recovery still looks very uncertain and this continues to provide ample room for gold to float higher, Innes added.
· More than 13 million people have been reported to be infected by the novel coronavirus globally and 571,807 have died.
· Coronavirus infections in the United States continued to surge over the weekend as Florida reported a record increase of more than 15,000 new cases in 24 hours on Sunday.
· The dollar index fell 0.2% against its rivals, making gold less expensive for holders of other currencies.
· Adding to the worries over economic pain, U.S. President Donald Trump on Friday said he was not currently thinking about negotiating a “Phase 2” trade deal with China.
· Gold is used as a safe investment during times of political and financial uncertainty.
· Indicative of investor sentiment, speculators increased their bullish positions in COMEX gold and silver contracts in the week to July 7, the U.S. Commodity Futures Trading Commission said on Friday.
· Gold is going north of $1,800
Gold prices are heading further north of $1,800 next week, analysts pointed out. "It looks like we are on our way to test those all-time highs around $1,900," said Millman, adding that the new support level for next week is $1,800.
"All of the factors that were supporting gold a year ago are all still present. None have improved or changed. I expect gold to be higher going forward in the second half of 2020," he added.
· Gold's record-high of $1,921 from September 2011 is now in sight, said ABN Amro senior FX and precious metals strategist Georgette Boele.
"Against the dollar, gold's all-time high of USD 1,921 is now within reach. The stars are aligned for gold prices to continue to rise. Aggressive monetary policy easing, ultra-low interest rates, negative U.S. real yields, fiscal stimulus and the technical outlook all support gold prices," Boele said this week.
· Another bullish call was issued by FXTM's market analyst Han Tan: "Given subdued U.S. real yields and the stubborn risk aversion in the markets, this is clearly a supportive environment for Gold, with a repeat of the September 5, 2011 record closing price of $1900.20 in its sights."
Melek is also optimistic on gold for next week. "We are likely to test $1,829-30 on futures. Wouldn't be surprised if we go into $1,840s on weak data," Melek said. On the low-end, Melek is watching $1,790.
· The next resistance level for LaSalle Futures Group senior market strategist Charlie Nedoss is $1,830. "I am looking for gold to push higher next week. Don't think we'll break the uptrend."
Nedoss said the fear trade is kicking in and new buyers are turning to gold as part of their portfolio diversification during these uncertain times.
"Gold up 15%-16% on the year. It is seeing a resurgence as an asset class. Traditional 60%-40% portfolios are split between stocks and bonds. Now, you are seeing precious metals work their way in. People put more gold into their portfolio mix — just look at the ETFs inflows. What I am gleaning from that is gold is being gadded in portfolios for protection," Nedoss said.
· "Reopening might be not as quickly as people thought. Could see more closures in states like Florida and Texas. Plus, other countries could be more cautious when reopening based on the U.S. experience …. We could see the economy suffer and see lousy numbers into August and September," TD Securities head of global strategy Bart Melek told Kitco News on Friday.
Temporary consolidation around the $1,800 level is not being ruled out by analysts, who said that any dip in prices will be bought as the precious metal ultimately heads higher.
"For now, we might consolidate near the current levels. But the tilt is to the upside. The reason for that is that the economic recovery maybe somewhat slower. The reality is that risk appetite might not move higher forever. And that realization will be solidified and the Fed is going to end up doing more, not less," said Melek. "Gold will consolidate here and move higher."
· Gold holding above $1,800 an ounce this week is a very bullish trend, said Gainesville Coins precious metals expert Everett Millman. "We haven't seen these levels in nine years, so I expect that we will test support a few times," Millman said.
· There are a few important releases on the agenda next week, including U.S. CPI number from June on Tuesday, U.S. industrial production data from June on Wednesday, U.S. retail sales from June on Thursday, the ECB rate announcement on Thursday, U.S. jobless claims on Thursday, as well as the U.S. building permits and housing starts from June on Friday.
Another key element to pay attention to starting next week is the U.S. earnings season, which could present a bleak picture of the economy.
· Don't expect to see a prolonged correction in gold prices - Commerzbank
After a brief dip below $1,800 an ounce Thursday, the gold market has once again bounced back and is now looking to end the week near its recent nine-year highs. In a report Friday, commodity analysts at Commerzbank said that they don’t expect to see any major correction in gold in the near-term.
“We regard the decline in gold and silver prices to be a healthy correction following their previous steep rise,” they said. “We do not expect any prolonged correction, as the general situation is clearly favorable for gold and silver.”
The German bank remains bullish on gold as the COVID-19 pandemic continues to devastate the global economy. They added that the U.S. remains particularly vulnerable as the number of cases continue to rise at record levels.
With all the economic uncertainty caused by the coronavirus, Commerzbank said that it expects the U.S. government and the Federal Reserve to maintain significant stimulus measures.
“US Democrats are already calling for additional corona rescue packages. It remains to be seen whether the Republicans will block such additional aid ahead of the congressional elections in November,” the analysts said. “The deficits in the US national budget, which had already increased massively, are thus likely to get even bigger. The US Federal Reserve is also likely to remain in demand to tackle the crisis.”
· Silver demand up 10% in H1 due to investor demand
Silver demand by investors was up 10 percent, said the Silver Institute yesterday.
The institute said there was "...remarkably strong growth in silver-backed exchange-traded products (ETPs), which have posted successive all-time highs this year, together with solid silver coin and bar investment."
The price for the metal has gotten better. The institute noted that the silver price averaged US$16.65 through to the end of June.
The Silver Insitute described the inflows into silver ETPs as being "impressive" this year.
"As of June 30, global holdings reached a fresh all-time high of 925 million ounces (Moz), which is roughly 14 months of mine supply. The ETP growth in the first half 2020 of 196 Moz comfortably surpassed the highest annual inflow of 149 Moz set in 2009. North American listed funds accounted for some 90% of the ETP inflows since March," writes the institute.
· Elsewhere, palladium gained 0.9% to $1,987.77 per ounce, platinum rose 2.4% to $834.05 and silver climbed 1% to $18.86.
Reference: CNBC, KITCO
Thai
Eng