We are currently facing a plethora of seemingly enormously adverse economic data being released by governmental statistical entities, and this data is likely to get worse before it gets better. Indicators like unemployment levels, PMI readings, retail sales figures, manufacturing output, etc, are all continuing to get worse.
We’re going into a recession. We don’t know how deep it will be or how long it will be. Debt is increasing. Governments are having massive increases in debt to raise the funds to get through this crisis. So, there’s an awful lot of uncertainty in the market going forward. Gold doesn’t pay any interest, but with interest rates at zero or even negative in Europe and Japan, gold is now competitive with interest-bearing instruments.
U.S private sector ADB job losses were worst in this sector, for the month of April . Though this came broadly on expected lines, there was o big panic since for over 8 weeks now. US government and U.S. Fed, both are putting in massive stimulus to avert this nightmare situation.
Gold price recovered Monday from last week’s drop as investors keep embracing safe-haven assets during a tumultuous economic environment hit by the covid-19 pandemic.
The logistics of transporting physical gold have also been impacted by the pandemic, with the precious metals industry scrambling to keep the market moving. Transportation costs have surged about 60% as a result of the worldwide lockdowns, increasing the premiums paid for metals.
As we see a gradual easing of all the restrictions and businesses start to reopen, that will certainly have an impact on precious metals prices. WHO and CDS fear a significant danger of a second COVID-19 wave and if at all that happens, gold prices will rally.
Gold is becoming attractive in this environment where uncertainty is very high, growth is expected to weaken, and at the same time you have negative real rates which make gold attractive to hold as a diversifier in investor portfolios
The surge in gold is set to continue with a test of $1800 the next big round number in sight