The trading session on Thursday saw gold prices reaching towards the $1,580 level – another strong performance in a series of consistent results since the start of the year. The surge in gold prices of 0.7% on Thursday comes amidst mounting concerns over an increase in the number of new coronavirus cases, fuelling demand for safe-haven assets. As a result, major US and European stock indexes surged to fresh records.
Canada’s main stock index, on the other hand, fell on Thursday for the first time in four sessions, although the materials sector, which includes precious and base metals miners and fertilizer companies, added 0.1% as gold futures rose 0.4% to $1,573.4 an ounce. U.S. gold futures GCcv1 settled down 0.6% at $1,570.10 an ounce.
Across all Canadian issues, the gold stocks of Wesdome Gold Mines came on top with a jump of 4.7%. Several Canadian junior gold miners announced quarterly results, which saw analysts upgrading their stocks. Among them were Sandstorm Gold Royalties, which announced record 2019 annual results and its following uplisting to the New York Stock Exchange.
Gold miner Agnico Eagle Mines Ltd (AEM.TO) (AEM.N) lowered its full-year 2020 production outlook due to its slower-than-expected ramp up of production at its Nunavut operations in Canada. However, Agnico reported a fourth-quarter profit compared as sales and realized gold prices rose. On an adjusted basis, the company reported a profit of 37 cents per share, in-line with analysts’ average estimate.
Investors are anticipating gold breaking the $1,600 level and are comfortable with gold stocks grinding higher, viewing the slow gradual rise as bullish. The last move of gold prices pushing through resistance is now seen as short term support at the 10-day moving at $1,569. Short term momentum has turned negative to neutral. For a brief moment, it looked as if gold prices were poised to turn over but the increase in the coronavirus outbreak changed that dynamic.
Currently, gold price is not indicative of physical demand but rather tied to complex geopolitical factors. So what does it all mean for the gold market? Investors understand that the current uncertainty is temporary and once the coronavirus is contained, global growth will resume and economy will stabilize.
There is increasing pressure on central banks to remain very accommodative until there is some resolution on the coronavirus outbreak. The fresh liquidity will support the risky assets. This may negatively affect safe-havens such as gold, but the yellow metal often moves in tandem with the stock market in times of monetary accommodation. Despite gold not rallying due to the coronavirus, it continues to show strong resilience even when fears subsided a bit.