Gold Prices pulled lower after scaling to seven-year highs at the start of the week. Spot gold fell by 0.9% to the $1,711, but still remains at seven-year highs. The pullback came at the backdrop of equities dropping amidst concerns of a looming economic recession amidst the Coronavirus pandemic.
Gold Price Action
Gold has been on an impressive run for the better part of the year. It has already registered its best month since 2011 after rallying by more than 11% in April. Likewise, Blue Line Capital President, Bill Baruch, believes the precious metal could clock record highs of $2,000 an ounce before the end of the year.
The formation of a Head and Shoulder pattern, according to Baruch, has set the stage for the precious metal to continue powering high. However, the analyst believes the precious metal could pull lower probably back to the $1700 an ounce level, from where more buyers are likely to join the party and fuel a rally to the $2,000 level.
Factors Driving Gold Prices
One of the factors likely to support Gold price rally is the injection of huge chunks of money into the market by the Federal Reserve. Massive Stimulus packages have gone a long way in supporting the equity markets with precious metals such a gold emerging as beneficiaries. The stimulus packages have bolstered liquidity levels conversely supporting gold prices as well.
Gold has also continued to edge higher on risk aversion. In times of economic crisis, as the one looming amidst the coronavirus pandemic, investors often turn to safe havens to store wealth. Gold Price has since continued to edge higher even on the U.S Dollar strengthening against a basket of other major currencies.
Lockdowns around the world designed to avert further spread of the coronavirus has brought the global economy to a halt. Economies around the world are having to contend with slow growth as key sectors of the economy remain shut. Growing fears of economic recession should continue to support gold as a safe-haven.