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James Hyerczyk
Comex Gold

Gold futures are trading higher on Thursday as investors react to softer interest rates, a weaker U.S. Dollar and an early dip in demand for risky assets like stocks. This is an interesting development because it marks the first time in several weeks that gold is reacting in a more traditional manner. Meaning, demand for paper down, demand for hard assets up.

At 10:45 GMT, June Comex gold is trading $1706.30, up $22.00 or +1.31%.

At the start of the coronavirus crisis, Treasury yields spiked lower, stocks broke sharply and gold rallied. That was a traditional reaction.

When stocks started to crash, margin calls had to be met, and investors sold gold to raise the cash needed to meet the calls. Furthermore, there was a liquidity problem and a U.S. Dollar shortage. So for several weeks, gold and stocks were moving in lock-step, meaning they were both moving in the same direction.

Today’s price action suggests gold and stocks are losing this tight correlation.

Daily Forecast

In addition to reacting to the traditional fundamentals, gold traders are also being influenced by the crucial meeting between top oil producers and the long Easter holiday weekend.

Short-term gold is subject to wild volatility swings due to its ties to numerous financial markets and of course, the ever-changing coronavirus stats.

Long-term, the fundamentals are bullish for gold. The market is flooded with fiscal and monetary stimulus which is helping to inflate gold prices.

Furthermore, now that the Fed has made enough U.S. Dollars available for liquidity purposes, the greenback could weaken substantially, which would be bullish for demand for dollar-denominated gold.

In economic news, traders should brace for volatility today at 12:30 GMT with the release of the weekly U.S. jobless claims report. Traders are pricing in a jump of about 5 million, which would put the three week total at 15 million.

This number will help gold traders determine the extent of the damage to the U.S. labor market and economy due to the coronavirus pandemic.

Another weak number will solidify the chances of an additional stimulus package from Congress. This would be bullish for gold.

After the initial reaction to the jobless report, volume could taper off as investors prepare for the long Easter holiday weekend.

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