Gold’s one-day dollar surge is one for the record books. But as bullion deliveries hit a snag and mining operations slow, the precious metal may soon see prices rally to new heights.
On Monday, the most-active April gold futures contract GCJ20, 1.474% rallied by $83, or 5.6%, to settle at $1,567.60 an ounce. The one-day dollar gain for the metal was the largest ever, based on data going back to November 1984, according to Dow Jones Market Data.
The move for the metal followed the Federal Reserve’s decision Monday to unleash its balance sheet and purchase an unlimited amount of Treasurys and securities tied to residential and commercial mortgages to ward off a credit crunch, a process known as “quantitative easing” that aims to pump liquidity into frozen financial markets.
“The endless QE to trillions in global liquidity programs are all in gold’s favor among the general turmoil.” “Gold is returning back to its function as a global currency.”
Spina said he would not be shocked if gold moves up $1,700 an ounce by “Friday of this week or next,” and a gold price of $2,000 and higher is possible in the second quarter.
Futures prices haven’t traded at $1,700 since late 2012 and prices at $2,000 would mark record highs, according to FactSet data.
“We are near the days where we see gold go up $100 or $200 a day and not see a pullback,” Spina said.
The market may also see a “perfect storm for a super price spike” in the coming months as the supply chain for physical gold bullion breaks down,” he said. There are “going to be difficulties sourcing new supplies in a hot market.”
Demand for bullion has been surging for “many weeks” but refiners are closing down, and miners are shutting production, due to COVID-19 lockdowns, he said. “So with a true gold rush underway, there is a perfect storm brewing for the gold and gold miners.”
Recent volatility in the price of gold has been “driven by massive liquidations across all assets, and likely magnified by leveraged positions and rule-based trading,” he said. Still, it remains “one of the best performing asset classes year to date.”
source: Market Watch