In Asia and Europe on Monday, spot gold prices continued their recent gains, rising to $1855.47 at one point in intraday trading, a new three-and-a-half-month high. Gold's attractiveness has been boosted by recent concerns about a surge in novel coronavirus cases in some Asian economies. At the same time, gold bulls have benefited to some extent from the decline in real US bond yields and the cryptocurrency market.
Singapore will close most schools from Wednesday after the country reported the highest number of local cases of novel coronavirus infection in months. Taiwan added 333 local confirmed cases of COVID-19 on Monday, and Taiwan's epidemic command center will impose new restrictions on the gathering and movement of people.
"there seems to be some concern about the resurgence of the novel coronavirus epidemic in Singapore, Taiwan and the Asia-Pacific region in general, which has boosted demand for safe-haven assets," he said. DailyFX strategist Margaret Yang said. "at a time when several economies in the Asia-Pacific region are facing a new wave of novel coronavirus epidemic, the rising demand for safe-haven assets and inflation hedging could provide good support for gold prices."
After a sharp fall in the first quarter of this year, sentiment in the precious metals market has recovered significantly in the past few weeks, as evidenced by the position data: net long bets on gold by hedge fund managers rose to their highest level in three months, while data compiled by Bloomberg showed that gold ETF positions have also risen for six consecutive trading days.
The performance of related market is "escorting" gold.
It is worth mentioning that behind the recent strengthening of gold, the performance of two types of related markets is also protecting its uptrend-real US bond yields and cryptocurrencies have fallen recently!
As we all know, the real rate of return is one of the important driving forces of gold price trend, because it represents the opportunity cost of holding gold, the two tend to show a strong negative correlation. Recently, as US bond yields continue to consolidate, market inflation expectations continue to rise, and the negative value of real yields is widening, which has become the most key driver of gold's rally.
Jesse Felder, founder of Felder Report Investment Newsletter, said that because inflation expectations are rising much faster than nominal yields, real yields have fallen significantly, which is as good for gold prices as we have seen in recent years. Once emerging trends in inflation and interest rates prove to be more than "temporary", gold prices are likely to remain vastly undervalued.
In addition to the fall in real yields, the recent collapse in the cryptocurrency market also seems to be good for gold.
On Monday morning, the ratio of Bitcoin to gold fell to its lowest level since early February amid market sentiment that was more cautious about speculative assets. A bitcoin is now equivalent to about 23 ounces of gold, well below the record 36 ounces set in April.
Judging from the comparison of the trends of gold and Bitcoin in the past two years, although Bitcoin once had the reputation of "digital gold", the two trends are no longer the same, but more like a "life-and-death" competitor. Once Bitcoin reaches its peak and the trend reversal is further verified, and more assets in the encryption market flow out, the precious metals market may instead be favored.
Is the gold price expected to return to the $2000 mark in the future?
At present, on the technical side, the price of gold has risen above the key 200-day moving average within the day, while bulls are testing the key downward trend line since their all-time high in August last year.
"I expect gold prices to continue to attract safe-haven inflows in the coming weeks," said Sean Lusk, co-head of, Walsh Trading's commercial hedging business. "his goal is that gold prices will eventually rebound to $1900, remain neutral this year, and then start a new strong upward trend."
Steve Dunn, head of standard investment management (Aberdeen Standard Investment) ETF, set his sights on the $2000 mark. He predicted that gold would have an opportunity to challenge the price of $2000 an ounce and said that the inflation warming target was not clear and that Fed policy would be caught in a dilemma.
Dunn believes that the Fed will not change its policy until the end of the year, which will be good for gold prices. "We are still a long way from a full economic recovery, and we can still see a lot of panic in the labour market. The US economy cannot support higher interest rates, which will fundamentally benefit the gold market. "
However, there are also some people in the industry who are cautious about the rising price of gold. Marc Chandler, managing director of Bannockburn Global Forex, pointed out that although gold prices are currently performing better than he expected, he is still cautious about gold prices rising further. 'The market is a little overstretched,'he added.
Chandler is more likely to sell when it strengthens at the start of the week and keeps a close eye on yields.
