Gold is increasing its traditional role as a safe haven asset while a lot of fears have seen to squeeze markets and perhaps as a result, investors have sought protection amid uncertainty and high risks. The pandemic supports the mood for risk off and increases demand for hedge instruments. The decline in new cases of infection in most countries only strengthens the appetite for safe haven assets while economic indicators and released data are still reflecting a severely negative picture.
The rise in gold prices is fueled by the Federal Reserve (Fed) and other central banks' policies. The unprecedented support of the economies by the pouring in of enormous liquidity and extremely low interest rates are dramatically increasing world money supply. This may lead to several reasons for a rally in gold prices. One of the factors may be that the liquidity provided by central banks for the banking system and to support the stock and debt markets is not going into the real sectors and is reinvested in safe haven instruments. Gold is traditionally considered as one of these instruments. Money supply puts pressure on inflation and worldwide investors usually seek to mitigate the risk of rising inflation and to protect savings via gold.
These are the reasons why gold prices are pointing toward $1800/toz, a maximum level since 2012.
The last week of April 2020 may support gold if the Fed is to maintain its recent call for a loose monetary policy in order to support the US economy in its FOMC meeting on April 29. Gold prices may receive an additional impulse to rise to the area of $1770-1790/toz. The support level for gold is at the $1690-1700 area.
Analysis and opinions provided herein are intended solely for informational and educational purposes and don't represent a recommendation or investment advice by TeleTrade.
Risk Warning: Trading Forex and CFDs on margin carries a high level of risk and may not be suitable for all investors. CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 72.72% of retail investor accounts lose money when trading CFDs with this provider. You should consider whether you understand how CFDs work and whether you can afford to take the high risk of losing your money. Prior to trading, you should take into consideration your level of experience and financial situation. TeleTrade strives to provide you with all the necessary information and protective measures, but, if the risks seem still unclear to you, please seek independent advice.
© 2011-2021 Teletrade-DJ International Consulting Ltd
Teletrade-DJ International Consulting Ltd is registered as a Cyprus Investment Firm (CIF) under registration number HE272810 and is licensed by the Cyprus Securities and Exchange Commission (CySEC) under license number 158/11.
The company operates in accordance with the Markets in Financial Instruments Directive (MiFID).
The content on this website is for information purposes only. All the services and information provided have been obtained from sources deemed to be reliable. Teletrade-DJ International Consulting Ltd ("TeleTrade") and/or any third-party information providers provide the services and information without warranty of any kind. By using this information and services you agree that under no circumstances shall TeleTrade have any liability to any person or entity for any loss or damage in whole or part caused by reliance on such information and services.
TeleTrade cooperates exclusively with regulated financial institutions for the safekeeping of clients' funds. Please see the entire list of banks and payment service providers entrusted with the handling of clients' funds.
Teletrade-DJ International Consulting Ltd currently provides its services on a cross-border basis, within EEA states (except Belgium) under the MiFID passporting regime, and in selected 3rd countries. TeleTrade does not provide its services to residents or nationals of the USA.