Last week began with gold trading near record high levels, although a few factors along the way started to turn around, including hopes for a COVID-19 vaccine, rise in treasury yields, strong dollar and positive economic data. There are no words which can describe last week’s movement as even “wild swings” is an understatement. Although, after experiencing an intense session of profit-taking earlier in the week, gold is trading back above $1,950 per troy ounce. Some caution is necessary and should be expected after the big run-up since March, but the greater influence on the market remains from the amount of stimulus pumped into the global economy since the pandemic began and where that created money is likely to end-up.
Major countries are fully or partially functioning even though the threat of virus impacting the economy and affecting people at a significant pace is increasing rapidly. Many countries including UK have commented that a second wave is very much possible to hit the economy; hence they are not in favour of completely easing the lockdown restrictions. On the other hand, the vaccine news is filling the market with optimism as many companies have successfully completed trials and are announcing positive news on the same. Russia last week became the first country to announce the vaccine even though they are still in the Phase three trials, the test results look quite promising. Market participants were filled with optimism by this news and the similar effect was seen on the safe have metals. There is still lot of questions around the vaccine news, like when will the final product be out? How will it be mass produced and distributed globally, etc. but investors is cheering all the updates that are coming on their way.
Investors still remain attracted towards the precious metal thanks to US-China trade tensions. Trade war between both the countries is increasing panic in the market every day, apart from sanctions which were the game last year, there are several variables which have been added now, and virus itself is one of the reasons which have aggravated the tensions between both. Amidst all this heat, market saw volatility as there were a lot of speculation regarding the US-China meets this weekend, although there was nothing exciting that came out of it.
Central banks continue to take all the necessary precautions against the virus impact hampering the growth of their respective economy. Last week, not much activity was seen from the central banks, although all the policy meeting and comments from central bank governors till now have been dovish, there has been a clear sign of concern regarding the impact of COVID on their respective economy and what more measures can be undertaken in order to minimize the impact as far as possible. There is an announcement expected on the stimulus package from US which has kept the market alive, although it is still in the negotiation phase.
Investors kept an eye on the important data points where US retail sales rose 1.2 percent in July, coming in weaker than expectations, other data points like inflation from US & India were reported positive. Speculators, last week reduced their bullish positions in COMEX gold and silver contracts.