Gold Market Outlook for 2nd - 20th March, 2020 (Fundamentals)
Updated
Hello, everyone.
Last Friday, Gold surprised us by falling more than 800 pips in one day. One of the biggest down move in recent years, and more than 1200 pips from the record high of $1685. Closed in $1586, it made us wonder where it will be in the next week. Will it be continuing the fall, or will it go upwards and reclaim its title as a "safe haven"?
Let's analyze about the 800 pips drop.
It happens when the stock markets are crashing, as you can see I took an example of NASDAQ in the chart. It's enjoying uptrend for the moment until the fear of CoronaVirus outbreak soaring. There is quite a gap between the Thursday closing and Friday opening bell price, indicated there was a panic selling on the Wall Street (and all over the world, actually) following first death report of COVID-19 patient on the US soil. This event further confirmed the market fear of the virus outbreak, in addition of several companies such as Apple and Microsoft stated that they won't meet previous earning forecast because of the virus in China. The virus also affect global trade overall by interfering with manufacturing and delayed shipping.
On the other hand, while the safe haven gold was bullish because of the virus-inspired global risk, traders and investors in bullion started profit taking actions that made the price slowly drop. When the stock market crashed, hedge funds and investment firms are in panic and selling many of the shares that made the price further down. Booked losses was massive, so they need a massive capital raise before the market open on Monday and partly to recover losses by selling their gold and other profitable hedge they had. That explains why the bullion turned to bearion near the market closing. The price touched $1563 before went up again to $1586.
Here is my take.
This occurrence only confirms the safe haven status of gold and the price will get back to $1600 mark and possible break to $1700 in near future. It may still go down for one until three days ahead, at maximum to $1540 area. The Fed is reluctant to cut interest rate further this year, but its options are limited in regard to the worsening situation of US (and the world) economy because of the COVID-19. While the global risk will still drive the price raise, another interest rate cut will fuel the bull because of the risk of increasing inflation.
Verdict:
Long on gold when the technical supports and always manage risk of the possible further drop to $1540.
Trade with your own risk and caution.
Last Friday, Gold surprised us by falling more than 800 pips in one day. One of the biggest down move in recent years, and more than 1200 pips from the record high of $1685. Closed in $1586, it made us wonder where it will be in the next week. Will it be continuing the fall, or will it go upwards and reclaim its title as a "safe haven"?
Let's analyze about the 800 pips drop.
It happens when the stock markets are crashing, as you can see I took an example of NASDAQ in the chart. It's enjoying uptrend for the moment until the fear of CoronaVirus outbreak soaring. There is quite a gap between the Thursday closing and Friday opening bell price, indicated there was a panic selling on the Wall Street (and all over the world, actually) following first death report of COVID-19 patient on the US soil. This event further confirmed the market fear of the virus outbreak, in addition of several companies such as Apple and Microsoft stated that they won't meet previous earning forecast because of the virus in China. The virus also affect global trade overall by interfering with manufacturing and delayed shipping.
On the other hand, while the safe haven gold was bullish because of the virus-inspired global risk, traders and investors in bullion started profit taking actions that made the price slowly drop. When the stock market crashed, hedge funds and investment firms are in panic and selling many of the shares that made the price further down. Booked losses was massive, so they need a massive capital raise before the market open on Monday and partly to recover losses by selling their gold and other profitable hedge they had. That explains why the bullion turned to bearion near the market closing. The price touched $1563 before went up again to $1586.
Here is my take.
This occurrence only confirms the safe haven status of gold and the price will get back to $1600 mark and possible break to $1700 in near future. It may still go down for one until three days ahead, at maximum to $1540 area. The Fed is reluctant to cut interest rate further this year, but its options are limited in regard to the worsening situation of US (and the world) economy because of the COVID-19. While the global risk will still drive the price raise, another interest rate cut will fuel the bull because of the risk of increasing inflation.
Verdict:
Long on gold when the technical supports and always manage risk of the possible further drop to $1540.
Trade with your own risk and caution.
Note
March 3rd: The President of United States urges The Fed to cut interest rate, amid CoronaVirus risk. It's now up to the bankers' decision to cut or not. Interest rate cut will have effect on the market, weaker USD and stronger gold.Note
Federal Reserve Bank of US finally pull the trigger to cut interest rate, as predicted in this analysis. Price moved up 400 pips to touch $1643.
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