Gold prices remained stable on Wednesday as investors sought safe-haven assets after fears of a economic downturn due to increasing lockdowns and other global restrctions to combat the coronavirus pandemic.
As oil prices took a plunge due to on-going price wars between OPEN and non-OPEC members and port shutdowns that brought tankers and refineries to a halt, investors are turning to real assets like gold.
This caused spot gold to climb up 0.6% at $1,580.29 an ounce, having earlier risen as much as 1.8%. U.S. gold futures settled 0.3% lower at $1,591.40.
Wednesday’s trading session offset some of the market volatility during the trading session on Tuesday, with analysts seeing gold rallying towards the $1650 level. Although this is not expected to happen quickly as there is still a significant amount of US dollar demand.
The longer-term uptrend, however, point towards gold prices heading towards the $1700 level. The alternate scenario of course is that the market breaks down below the $1550 level, reaching down towards the $1500 level.
Manufacturing sectors contracted in March both in the US and abroad, with activity hitting its lowest level since 2009, as the coronavirus outbreak caused widespread shortages, a survey showed. Despite climbing gold prices, concerns are growing among Canadian junior gold miners. With mining operations put on hold and shutdowns of plants and distribution centers, the supply chain is collapsing. Many brokers are unable to meet the demand for bullion as suppliers have stopped shipping gold.
Gold remains in short supply because it’s shipped on commercial flights that have been grounded recently. Some countries like Russia announced its central bank would suspend gold buying in its domestic market starting April 1, Reuters reported.
On Tuesday, the U.S. Federal Reserve broadened the ability of dozens of foreign central banks to access dollars during the crisis by allowing them to exchange their holdings of U.S. Treasury securities for overnight dollar loans.
While gold bulls still have the overall near-term technical advantage, this last move is expected to cool down interest in the yellow metal in the near future according to Kitco Metals senior analyst Jim Wyckoff.
If government lockdowns continue worldwide, we can expect a systemic banking system financial crisis which will see gold do incredibly well. If there is a global debt deflation, gold will do extremely well. Mark Mobius, the veteran emerging-markets investor recently stated, The trend for gold is going tocontinue to go up even after recent volatility as declining interest rates and money supply going through the roof is supportive of bullion prices.