Gold eases back from corrective highs, bulls stepping back in
- USD dollar slowing up, gold benefitting as the dust starts to settle, if only momentarily.
- All eyes turn to Congress and stimulus package.
The price of precious metals has drawn in a great deal of attention during the COVID-19 outbreak and subsequent rout in financial and commodity markets. The global economy is on the brink and investors have been squeezed out of long term positions across various asset classes, forcing them into a flight for cash which has supported the US dollar and seen longs trimmed in gold.
What we have seen is counter-intuitive to the normal safe haven playbook, but given the circumstances, and casting minds back to the GFC in 2008/09, we saw the same price action and direction of money flow. We could, therefore, expect to see a rise in gold prices when the dust settles following the dash for cash.
We have started to see a reaction on gold to the Federal Reserve's measures as they move to unlimited QE which was announced this morning. These will include authorization for corporate bond purchases and a new financing facility, helping to send gold prices higher as bulls start to resurface and the dollar slows down.
All down to Congress now
At this juncture, the Fed is at the limit, so we are also waiting on US Congressional leaders to come up with a third stimulus package that could reach $2 trillion and include relief for major industries such as airlines, small businesses that have seen revenues dwindle or disappear, and workers facing layoffs and loss of health coverage. Last night, Congress failed in a procedural vote that went 47-47, which needs 60 votes to fast-track – there are 5 republican senators that are self-isolating and are currently unable to vote but another procedural vote is scheduled for Friday.
Gold levels