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Gold prices gain as coronavirus cases surge
· Gold prices rose on Tuesday after a fresh wave of coronavirus infections raised concerns over a global economic recovery and bolstered the precious metal’s safe-haven appeal.
· Spot gold gained 0.3% to $1,908.02 per ounce by 0321 GMT.
· U.S. gold futures were up 0.3% at $1,911.20.
· “With rising virus cases globally, especially in the west, gold’s appeal as a safe haven is coming to the fore,” said Howie Lee, economist at OCBC Bank.
However, gold is likely to stay close to the $1,900 level until the U.S. presidential election outcome becomes clearer, Lee added.
· Many countries, including the United States, Russia and France, are setting records for Covid-19 infections and forcing some of them to impose new restrictions.
· Uncertainty over fresh U.S. stimulus has kept gold trading in a range over the past few weeks, with the metal now about 8% away from a record high of $2,072.50 hit in August.
While U.S. House Speaker Nancy Pelosi expressed hope that an agreement can be reached on the coronavirus relief package before the elections, White House economic adviser Larry Kudlow told reporters on Monday that talks have slowed.
· Gold, widely viewed as a hedge against inflation and currency debasement, has gained about 26% this year boosted by unprecedented stimulus measures from central banks and governments globally to blunt the economic hit of the pandemic.
· “Gold is still looking for that elusive inflationary spark,” Stephen Innes, chief global market strategist at Axi said in a note.
· On the technical front, spot gold may end its bounce around a resistance at $1,912 per ounce and then retest a support at $1,887, according to Reuters technical analyst Wang Tao.
· Gold exports to the U.K. from Switzerland hit a one-year high in September, according to data from the Swiss customs authority. Bloomberg reports bullion bars are being sent to London vaults to meet requirements for physically backed ETFs.
· Billionaire hedge fund manager John Paulson said that gold “is going to gain relevance in the near future” and that it is not a “get-rich-quick investment,” but a long-term store of value to protect against inflation. Bloomberg notes Paulson made the comments at Grant’s 2020 Fall Conference on Tuesday. The investor expects a strong economic recovery after the pandemic, with expanding credit and inflation.
· Why is gold price action on pause? Standard Chartered sees $2,100 level early next year
Gold is continuing to take its cues from the U.S. dollar as analysts focus more on the fiscal stimulus prospects rather than the election itself, according to Standard Chartered.
Even though the macro environment remains very supportive of higher gold prices, the precious metal is stuck at the $1,900 an ounce level, said Standard Chartered precious metals analyst Suki Cooper.
“Gold prices continue to oscillate around USD 1,900/oz, between the 50-day and 100-day moving averages, but continue to take their cues from macro drivers, predominantly the USD rather than real rates,” Cooper wrote on Friday. “We expect this to remain the case leading up to the U.S. presidential election.”
Overall, most of the drivers remain supportive of higher gold prices into the next year, Cooper added, noting that Standard Chartered is projecting $2,000 an ounce level by the end of the year and $2,100 an ounce during Q1 2021.
“Negative real rates, expectations of a weaker USD and stimulus packages continue to paint a favourable backdrop for gold, but lighter positioning suggests caution ahead of the election,” she said.
The physical market has been weak ahead of the U.S. election, with Q3 likely turning out to be the weakest quarter for central bank gold buying in 10 years, Cooper wrote.
· No major gold price move expected until U.S. election or stimulus agreement: MKS PAMP Group
Gold is likely to trade around the $1,900 level until the U.S. election or a stimulus agreement, according to MKS PAMP Group.
"Gold prices continue to fluctuate as investors weighed the better than expected economic data against the stalled U.S. stimulus talks.
Investors should be looking at technicals to figure out gold's next price move, MKS adds.
"Over the past few weeks, we have seen a number of attempts at the $1,920-30 region, however it always ends up falling back off. That said support between $1,875-95 has been robust, the metal happily floating in a wedge between the 50 dma on the topside (currently at $1,921 on a daily chart) and the 100 dma on the downside (currently $1,883.50 on the daily chart).
This is closing in, so we are looking for a clear break of one of these levels in a technical sense to gauge the next direction. We do not see this happening before the U.S. election or a stimulus agreement however and look to play the range for the meantime."
· GOLD PRICE FORECAST TALKING POINTS:
On a shorter-term basis, there could be scope for a deeper pullback while that longer-term wedge remains in-play. Price action in Gold appears to be slipping below the bottom-side of the 1900-1920 zone, and underneath price action is another area of possible support running from 1859-1871. This zone is what helped to catch the low in early-August, and came back into play in late-September. Prices in Gold could dip down to this zone while still remaining above the September swing-low; setting the stage for another run at resistances of 1900, 1920 and eventually 1933 (the October swing-high).
· Citigroup estimates silver could surge to $40 an ounce in the next 12 months due to a recovery in industrial demand and strong investor appetite for precious metals. Analysts including Max Layton wrote in a note that silver will outperform gold because it is “more levered than gold to inflation overshoots, rebounding manufacturing activity.”
· $100 silver price: when and why we will see it – David Morgan
Gold and silver have always held a close correlation with each other, with silver usually outperforming gold in bull markets, as it did this year.
Assuming a $4,000 gold price target in two to three years’ time, which is roughly a 100% increase from current levels, and assuming a normalization of the gold-silver ratio to 40-1, then silver should be trading at $100 by the time gold doubles in value, said David Morgan of TheMorganReport.com.
The last time silver reached the $50 an ounce mark was in 1980 and then again close to $50 in 2011.
Even if a recession were to persist, monetary policy would have a stronger force on silver, beating the downward drag that weak industrial demand would have, Morgan said.
· Silver climbed 0.7% to $24.48 per ounce. Platinum rose 0.7% to $876.05 and palladium gained 0.3% at $2,358.77.
Reference: CNBC, KITCO, DailyFX