The price of gold opened Monday’s trading session on a bullish note even as central banks continue to implement similar measures that they did during the 2008 financial crisis, such as slashing interest rates.
Gold’s strong bullish position on Monday saw its price surge above three resistance levels which include the 1683.88, 1691.46 and 1692.74 price levels with some retracements in-between. Those retracements also meant some bearish movements which resulted in the price breaking through the 1681.31 price levels but the trend has largely remained bullish.
The price of gold has been trading near its one-month high, which suggests that it has been experiencing strong demand. There is one key factor that is fueling the precious metal’s rally and that is the looming concerns over the worsening economic outlook across the globe due to the coronavirus threat governments are still unable to subdue. The particular concern is that the situation might lead to a major economic recession.
Many investors tend to use gold as a safe haven where they can store their wealth to avoid losses associated with an economic decline during times of financial and economic crisis. Judging by the current situation, the global economy has experienced a significant slowdown in trade due to the COVID-19 pandemic. This explains the surging price of gold as investors shy off from currencies and other riskier Investment vehicles.
According to a report released by the Commodity Futures Trading Commission (CFTC), speculative investors have grown more interested in COMEX gold. Meanwhile, the economic situation is not looking any better despite the central bank measures aimed at supporting the economies. The number of coronavirus associated deaths in the U.S has gone up to almost 22,000, which indicates that the viral threat is not slowing down. Based on such findings, analysts expect that the situation will continue to worsen especially if no cure is found.
The lack of a cure at the moment means measures such as quarantine and self-isolation remain the best preventative measures. It also means that global economies will likely continue to suffer, and this pushes them closer towards recession territory. These expectations are the reasons behind the increased investment in gold as a means of protecting wealth.