Gold News

Gold Prices Make Biggest Weekly Gain Since 2008 as Stock Market's Virus-Relief Rebound Fades

GOLD PRICES headed for their strongest weekly gain since late 2008 on Friday, adding more than 8.2% as the rebound in global stock markets faded despite governments and central banks unleashing record financial aid, stimulus and lending programs to try and offset the economic slump caused by the novel coronavirus and resulting lockdowns worldwide.
 
Government bond prices rose, pushing interest rates sharply lower again, while industrial commodities fell back with equities, taking crude oil back below $25 per barrel.
 
Having made its largest 1-day jump in Dollar terms since January 1980 on Monday, the gold price headed for a $125 weekly gain ahead of the Friday PM benchmarking in London.
 
The S&P500 share index in New York meantime lost a third of the week's earlier 14.1% rebound, and thus failing to erase last week's plunge.
 
Chart of S&P500 index vs gold price, weekly close. Source: St.Louis Fed
 
"The US has just passed an era-defining stimulus package that dwarves the 2008 measures, and the Fed has committed to do 'whatever it takes' to protect the economy," says Jonathan Butler, strategist at precious metals trader and global conglomerate Mitsubishi.
 
"The impact is largely positive for gold [but] coronavirus-related market stress" also spurred Tuesday's breakdown between Comex gold futures prices and London's over-the-counter spot price "in what is normally a very efficient market with tight spreads."
 
Comex April contracts today retreated below London spot prices after surging to a premium of $100 per ounce earlier this week.
 
"The causes were multiple," Butler says, pointing to cash liquidity issues "amid the recent scramble for the Dollar, [plus] a good deal of speculative activity in gold and, perhaps most importantly, a lack of physical gold bars with which to fulfil deliveries into the exchange amid the closedown of international air travel and three of Switzerland's four gold refineries, plus the impact of the South African mining closure."
 
Sold out of many retail products, Australia's Perth Mint "is adding additional shifts to its refining output to meet some of that increased demand," according to Kitco News.
 
While South Africa's Rand Refinery has been exempted from the No.7 gold-mining nation's lockdown, its operations will be "significantly scaled-down" and it is struggling anyway to book air-freight space to fly out gold bars.
 
"While a few refiners have suspended production," said trade body the London Bullion Market Association to members late Thursday, the large-bar market "has 72 accredited Good Delivery gold refiners located in 31 countries...[so other] refiners are ready and able to accommodate the industry's needs.
 
"Refiners and other market participants are [also] actively engaged with logistics companies to overcome travel constraints and ensure the physical movement of metal via, for example, chartered or cargo flights," the LBMA added.

Adrian Ash is director of research at BullionVault, the physical gold and silver market for private investors online. Formerly head of editorial at London's top publisher of private-investment advice, he was City correspondent for The Daily Reckoning from 2003 to 2008, and is now a regular contributor to many leading analysis sites including Forbes and a regular guest on BBC national and international radio and television news. Adrian's views on the gold market have been sought by the Financial Times and Economist magazine in London; CNBC, Bloomberg and TheStreet.com in New York; Germany's Der Stern; Italy's Il Sole 24 Ore, and many other respected finance publications.

See the full archive of Adrian Ash articles on GoldNews.

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