Month: July 2020

Precious metals continued their upward trend towards multi-year highs on the first trading day of the week, as the weaker US dollar, the rising coronavirus infections cases, the massive monetary stimulus, the falling US bond yields, and the escalated US-China tensions, boosted the demand for safe-haven assets such as Gold and Silver.

Coronavirus Update:

Global cases: More than 16.2 million

Global deaths: At least 648,900

U.S. cases: More than 4.2 million

U.S. deaths: At least 146,900

Gold:

The price of gold climbed to $1.945/oz, reaching a new all-time high, surpassing the previous record price of $1.920/oz set in September 2011. Gold gained 5% last week and 25% since the start of the year

Silver:

Silver price gained 7% on Monday morning, climbing above $24.50, its highest level since August 2013. The white metal holds the same safe-haven status as Gold, but it also receives support from its industrial usage. Silver gained 20% last week and more than 100% since it bottomed at $11.60/oz just 4 months ago.

Reasons for the rally:

• The heightening geopolitical tensions continue to bolster safe-haven demand. The latest flare-up in the US-China tensions grew worries for the recovery of the two largest economies of the world. Tensions between two countries rose last week after China ordered the US to close its Chengdu-based consulate last Friday, retaliating after the US shut a Houston-based Chinese consulate a few days earlier.
• Precious metals have also received support as the coronavirus pandemic continues to devastate global societies and economies. According to the recent data, more than 16 million COVID-19 cases have been confirmed globally, forcing many countries to roll back or delay reopening plans, raising concerns of slower economic recovery.
• Gold and Silver prices have been rising over the last months amid the aggressive monetary and fiscal policies adopted by many central banks around the world to revive their economies. The zero interest rates and the falling bond yields have forced many investors to rotate their funds into the non-yielding precious metals. Gold has been recognized as the ideal hedge asset against inflation and currency debasement.
• The US dollar fell near two-year lows against major currencies amid the expectations for further monetary stimulus from the Federal Reserve, making gold and silver less expensive for buyers of foreign currencies.

Economic Calendar for July 27, 2020 (GMT+ 3:00):

Market Brief, Friday, 27th of July, 2020

Gold prices hit an all-time high of $1,945 per ounce this morning, while Silver price broke above $24 per ounce, as the escalation in the US-China tensions, the monetary stimulus, and the weaker US dollar; continue to bolster safe-haven demand. 

Looking at the forex market, we can see the Euro continuing its upward trend above the 1.17 level, hitting a 2-year high, gaining support from the massive EU recovery fund approved last week, and the drop of the US dollar index to its lowest level in two years. 

US stock futures edged higher on Monday morning, ahead of a big week of corporate earnings, and on hopes for another coronavirus stimulus package. 

Asian markets rose 1% on the first day of the week, following the overnight gains in the US futures coupled with improved Chinese industrial activity. 

Crude oil was slightly higher this morning, recovering some of last week’s losses as investors worry that the ongoing geopolitical tensions and rising COVID-19 cases would damage the oil demand growth. 

Commodity Update, Thursday, 23rd of July, 2020

Gold and Silver prices climbed to fresh multi-year highs on Wednesday, gaining support from rising geopolitical tensions, low interest rates, falling US bond yields, and the rapid increase in COVID-19 infection cases all over the world.

Gold hit its highest since September 2011 at $1.875 per ounce, nearing its all-time peak, while Silver broke above $23 per ounce for the first time since 2013. 

Silver gained more than 90% since it bottomed in early March, boosted from safe-haven flows, recovering industrial consumption in China and supply concerns.

The recent escalation in the US-China tension has led investors to seek safety into precious metals. The US government ordered China to close its consulate in Houston until Friday, accusing them of spying, while Beijing was considering shutting the US consulate in Chengdu city in retaliation over Houston. 

The tit-for-tat between the two largest economies of the world is likely to put at risk the Phase 1 trade deal and deteriorate the global economic outlook, fuelling demand for safety.

Furthermore, precious metals got support on the expectations of more fiscal and monetary stimulus from the US, together with the agreement on the massive EU Recovery Fund to support their coronavirus-hit economies. The stimulus measures are a positive catalyst for gold, which is considered a hedge against inflation and currency devaluation.