Gold settled on global markets in US dollars has risen to its highest level since 2012, exceeding USD 1,700 per ounce. As a result, the high from the end of March was broken, and the price is once again trying to continue the upward trend.
It is worth outline the historical context for the gold market, as the price of this metal seems to be rising, with small corrections, from the second half of 2018. At that time, the ounce cost around USD 1,200, which means that the price has risen by almost 50% to current levels. At that time, gold was bought by central banks and investors in the form of bars and coins, and by ETFs, which in turn were very popular and had to cover their units in gold.
Due to the lockdown of many economies, gold supply problems arose due to the coronavirus epidemic. This ignited the emotions even more, especially among individual investors. Gold is so sought-after that you can't even buy it physically. However, this is only a temporary stagnation in supply, which is not due to huge demand.
According to Reuters, the three largest gold refiners in the world from Switzerland have already been partially re-opened 10 days ago (they were closed on March 20 by the decision of local authorities). This break disrupted the global metal supply. We are talking about Valcambi, Argor-Heraeus, and PAMP, which are located near the Swiss border with Italy. Together, the three refiners process around 1,500 tons of gold a year – equivalent to one-third of global supply. Thus, the metal supply should normalize.
In turn, from the point of view of the futures market, we may face an interesting situation. Investors have recently reduced their involvement in futures contracts allowing them to potentially profit from price increases. This could turn on the warning light, showing that there may be an attempt to take profits from the entire upward trend. Then, a return to lower levels would not be excluded.
We mention the situation on the chart on our profile on the tradingview website, where you can find a detailed look at the current situation: https://pl.tradingview.com/chart/GC1!/fEFeNYGO/
Daniel Kostecki, Chief Analyst Conotoxia Ltd.
Materials, analysis and opinions contained, referenced or provided herein are intended solely for informational and educational purposes. Personal opinion of the author does not represent and should not be constructed as a statement or an investment advice made by Conotoxia Ltd. All indiscriminate reliance on illustrative or informational materials may lead to losses. Past performance is not a reliable indicator of future results.
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