Despite being one of the best-performing commodities in the capital markets, Gold is once again feeling the pressure amidst the Coronavirus pandemic. After rallying to the $1700 an ounce level in March, prices have softened in recent trading sessions. The yellow metal is once again struggling to find support above the $1600 an ounce level.
Gold Prices Tank
Softening gold prices stem from weakening demand for the precious metal by central banks. Russia, which is one of the biggest purchasers of the bullion, has in the recent past halted purchases as it continues to feel the pain of low oil prices.
Ed Moya of OANDA believes gold prices could remain under pressure in the next few months as Russia turns to a net seller to cash in as low oil price continues to take a toll on its economy. Now maybe the best time for Russia to cash in, it’s more than $40 billion of gold holdings, according to the analysts.
Similarly, shutdowns in China also appears to be taking a toll on gold prices as gold buyers have shunned malls resulting in the freezing of the domestic bullion market. Low demand in China is a major tailwind for gold prices as the country is one of the biggest gold consumers.
Gold Price Analysis
Gold prices could struggle to mount a recovery back to seven-year highs of $1700 an ounce should the COVID-19 pandemic continues to suppress demand in key markets, China consumers, for instance, accounted for a fifth of total gold demand in 2019.
While gold has tanked below the $1600 mark, it could bounce back on regaining its safe-haven status. Growing concerns about the health of the global economy amidst the COVID-19 pandemic, is increasingly triggering demand for safe havens.
With most economies staring at recession, economic powerhouse of the likes of the U.S, the U.K and Germany are not looking any better amidst lockdowns. Should the bullion rise and take out the $1650 handle, then there is a high likelihood of it rising to seven-year highs of $1700 an ounce.