Gold dips along with equities, strong dollar weighs
· Gold prices fell on Wednesday, a day after scaling over seven-year highs, as the dollar firmed and investors booked profits, although concerns of a global recession put a floor under prices.
· Spot gold fell 0.6% to $1,716.79 per ounce, by 1:52p.m. (1752 GMT). On Tuesday, prices had jumped as much as 1.9%to their highest since November 2012 at $1,746.50.
· U.S. gold futures settled down 1.6% at $1,740.20.
· "Gold has been following equity markets, and equities are selling off. That's causing volatility and along with a stronger U.S. dollar, it's getting folks to adjust their portfolios in response," said Bart Melek, head of commodity strategies at TD Securities.
"Before gold can really take off and have the big macro and central bank policy measures bring it up to our view of $2,000, there has to be some stability, because anytime there is a need to get cash and liquidity, gold is going to be sideswiped by that," Melek added.
· Global stocks fell as oil prices dropped and warnings of the worst global recession since the 1930s underscored the economic damage done by the new coronavirus.
· The dollar, meanwhile, rebounded on safe haven demand amid growing concerns that the damage to the global economy from the outbreak will be protracted.
· U.S. retail sales suffered a record drop in March, data showed earlier.
· Countries and central banks across the world have stepped up measures to combat the global heath crisis, which has infected over 2 million people and killed 131,100.
· In the latest move to cushion its economy, China cut a key medium-term interest rate to record lows, paving the way for a similar reduction in benchmark loan rates.
Despite the decline in prices on Wednesday, Commerzbank analyst Carsten Fritsch believes gold could cost $1,800 per ounce at year's end.
"The severe impact of the global lockdown on economies and financial markets, the flood of money released by central banks and governments and the ballooning sovereign debt point toongoing robust demand for gold as a safe haven and last-resort lifeline."
· Gold could reach $2,000 this year, but it’s not a buy until this level, chart analyst says
Gold is on a tear this month.
The precious metal is up 11% in April, its best month since 2011, and has reached levels not seen in nearly eight years.
Bill Baruch, president of Blue Line Capital, says its technical setup suggests even more upside.
“I love gold, and you need some in your portfolio,” Baruch said Tuesday on CNBC’s “Trading Nation.” The charts show “an inverse head and shoulders pattern — a beautiful technical pattern that played out through March into April and we’re now breaking out above. It broke out above it.”
An inverse head and shoulders pattern forms when an asset makes a low, a lower low, and a higher low – it implies a bottoming and change in trend direction.
“I do believe gold over the rest of this year will get to $2,000. I think it should be in your portfolio. The massive liquidity injected by the Federal Reserve, it’s going to support asset prices like equities, but it’s also going to support gold,” said Baruch.
Even with momentum behind it, Baruch is not willing to chase gold here. Instead, he sees opportunity in case of a pullback.
“There’s higher to go, but look to a move back to $1,700 as your buying opportunity,” said Baruch.
A move to $2,000 represents 13% upside and would take gold to record highs. A decline to $1,700 implies a 3% pullback.
· Silver was down 2.9% at $15.36, while platinum was flat at $774.55. Palladium dipped 1.5% to $2,185.85 per ounce.
· "We continue to expect the palladium market to be undersupplied this year and next year, despite latest industry expectations for auto sales to plummet by at least 14%," Standard Chartered Bank analysts said in a note.
Reference: CNBC, Reuters
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