Gold Shines for 6th-Straight Quarter; Trajectory in Question

Gold Shines for 6th-Straight Quarter; Trajectory in Question

imageCommodities11 hours ago (Mar 31, 2020 02:57PM ET)

(C) Reuters.

By Barani Krishnan – It’s one of the best winning streaks it’s ever had: six-straight quarters of gains. Yet, the upward trajectory of gold remains in question as volatility caps daily moves at above $1,600 an ounce and Russia moves from big buyer to possible seller of bullion.

Gold futures on New York’s COMEX settled this month’s to trade up 2% and rose 5% for the Jan-March period, staying with its quarterly performance since the fourth quarter of 2018.

For the day though, the benchmark June gold futures contract settled down 46.6, or 2.9%, at $1,596.6 per ounce.

Spot gold, which tracks live trades in bullion, was down $29.86, or 1.8%, at $1,591.85 by 2:41 PM ET (18:41 GMT). Bullion gained about 0.4% for March and nearly 5% for the first quarter.

“Gold prices are softening as central bank demand seems to be faltering. Russia, the world’s largest purchaser of bullion decided to halt bullion purchases, showing they are feeling the pain of low oil prices,” said Ed Moya of New York-based online trading platform OANDA.

“Russia will likely be a seller over the next few months and that will put a dent in the overall bullish outlook for gold prices,” Moya said, noting that Russia has amassed more than $40 billion in gold holdings over the past five years.

One reason for the heightened volatility in gold now is the cash crunch across markets due to disastrous effects of the coronavirus pandemic.

Often, in recent weeks, gold has acted more like a risk asset than safe haven, as investors dumped their holdings in the yellow metal to raise cash to cover trade margins and losses in stocks and elsewhere.

Canadian bank-backed brokerage TD Securities, however, said it expects gold to regain its bullish touch with the U.S. Congress leaning toward another stimulus package after the mammoth $2 trillion fiscal response approved for the pandemic this month.

“Gold prices appear to have run ahead of real rates, but looking forward, as the dust settles on covid’s impact we expect gold to perform smartly in the next phase of this narrative,” TD Securities said in a note.

“The extraordinary QE package, combined with large government stimulus packages reek of MMT, which should eventually send real rates on a downward trajectory, particularly as global central banks will be willing to let inflation run hot as part of their symmetric targeting framework. This should help cement a multi-year rally in the yellow metal.”

Moya had a similar longer-term view.

“Gold should still perform well over the next couple months as central banks continue to throw every stimulus measure they can to ease the impact of the coronavirus pandemic to the global economy,” he said.

Gold Shines for 6th-Straight Quarter; Trajectory in Question

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