• Joel

Gold Prices Stage a Comeback and Here is Why

Gold prices took a beating on Monday, as a number of bullish developments undermined demand for havens. 

As a reminder, these bullish developments were; 1) Moderna released positive Phase 1 trial results for a Covid-19 vaccine and 2) Germany and France released a joint proposal on the EU Recovery Fund, including for its to be funded by joint EU debt (aka. coronabonds). 

As a result, gold fell from its early Monday morning highs of above the $1760s to the low $1730s. 

However, gold has dusted itself off on Tuesday and is now trading back in the mid $1740s. Despite its recent slip, many analysts/traders remain bullish on gold in the medium-term. Here’s why…

1) Central Bank stimulus: More is likely on the way

Gold LOVES it when the value of money is eroded (i.e. when central banks do stimulus) and over the coming months, market are expecting a lot more of just that; Powell and the Fed have indicated that much more can and will be done to support the US economy, the BoE and RBNZ are considering negative rates, most other major central banks are on the road to more QE, not less. Floods of stimulus look set to keep gold prices bid.  

2) US/China tensions on the boil

US/China tensions continue to bubble under the surface and do not look to be going away anytime soon. Most recently, the US has turned its ire towards the WHO, which the US President says is a Chinese puppet and must make drastic changes or face losing its US funding. 

As the US and China spar over WHO, one must not forget the host of other points of tensions between the two countries, including; China’s treatment of the Uighur muslims (the Senate is threatening sanctions), China’s treatment of Hong Kong (the US has threatened Hong Kong’s “special” status), China’s aggressive territorial claims in the South China Sea (the US military and Chinese military are at risk of a clash) and the fact that the US/China Phase One trade deal is now all but completely dead. 

We continue to see higher gold prices in the future, and would not be surprised to see gold testing Monday’s highs sometime this week!



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