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Price of Gold Fundamental Weekly Forecast – Could Spike Higher on Steep Drop in Global Risk Demand

Fresh central bank liquidity from PBOC and RBA Could Be Supportive.
James Hyerczyk

Gold futures picked up a bid late last week, reaffirming the uptrend on the daily chart, and perhaps creating enough upside momentum to eventually challenge its January 8 top at $1619.60. Traders reacted to sliding U.S. Treasury yields, a plunge in global equity markets and a weaker U.S. Dollar. The catalysts behind the move remained the coronavirus and its impact on the global economy.

Last week, April Comex gold settled at $1587.90, up $9.70 or +0-.61%.

Gold finished its best month in five as concerns over economic growth due to the fast-coronavirus boosted appetite for safe havens.

Brokers Loving Gold’s ‘Safe-Haven’ Appeal

“Coronavirus continues to be a strong factor of support as we are seeing global growth concerns hurting other markets across the board. As a result, we’re seeing safe-haven demand drive into gold,” said David Meger, director of metals trading at High Ridge Futures.

He further added, “Gold is the quintessential safe-haven asset that money managers are viewing as an alternative for cash.”

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Weekly Forecast

Fear and uncertainty are the emotions driving gold prices at this time. Stripping out the emotion, plunging U.S. Treasury yields and lower demand for risky assets are likely to continue to provide the support this market needs to sustain the rally. Lower global economic growth and fear of a recession is another story that investors are watching.

More Central Bank Liquidity Provides Support

Early Sunday, the news broke that China stands ready to inject liquidity into the stock market as rumors fly calling for a sharply lower opening. Gold traders will also be watching on Tuesday to see if the Reserve Bank of Australia (RBA).

Reuters is reporting that China’s central bank said it will inject 1.2 trillion yuan ($174 billion) worth of liquidity into the markets via reverse repo operations on Monday as its stock markets prepare to reopen amid an outbreak of a new coronavirus.

Chinese authorities have pledged to use various monetary policy tools to ensure liquidity remains reasonably ample and to support firms affected by the virus epidemic, which has so far claimed 305 lives, all but one in China.

Investors are bracing for a volatile session in Chinese markets when onshore trades resume on Monday after a break for the Lunar New Year which was extended by the government.

Gold will look bullish this week as long as buyers can hold the market above last week’s low at $1567.90. Taking out last week’s low, given the current fundamentals will indicate something is wrong with the market. If that’s the case then stay away from it.

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