Markets remain perplexed

Gold has risen about 25% this year, supported by massive stimulus by governments and central banks worldwide as the metal is seen as a hedge against inflation and currency debasement. On and off we have been receiving news that are acting as pull and push factors for gold.

Following suit, last week, markets went in to perplex mode after U.S. President Donald Trump tested positive for corona virus. In spite of the global uncertainties surrounding this news, markets continued it remain bullish for gold as there are many key data releases and events lined up for the week. 

A lot of speculation has been surrounding gold lately. Economic data, stimulus package, presidential debate, China data and now the Trump news- it all seems like a rollercoaster for gold. 

Gold dropped to levels below $1900 an ounce and then managed to pull back and was seen trading around $1900 an ounce on Friday.

The bullion kingof India remarked that it was obvious that Trump’s corona virus news will create panic in the market, leading to uncertainties and pushing gold higher. But there was positive news over the weekend, that Trump has been recovering positively and hence we were expecting gold to stabilise.

Gold inched up on Monday as the dollar weakened, although gains were limited as news that U.S. President Donald Trump, receiving treatment for COVID-19, could be released from hospital boosted risk sentiment. Spot gold was up 0.1% at $1,900.46 per ounce by 0954 GMT. U.S. gold futures were down 0.2% at $1,904.50.

Top gold analysts and top gold dealers in India are of the opinion that gold alone will not be the only one to be influenced. Any news in those lines will also have a direct effect on stocks too.

Gold and stocks are trading together. There is going to be a lot of uncertainty, and there is a risk that investors will choose to liquidate their positions just to protect themselves in case some negative news is releases in the days to come.

It seems that current scenario looks best for speculation. Trump has symptoms but he is recovering positively. News released by the doctors treating him, will surely be a market stabiliser.

With Trump in quarantine for the next two weeks, all eyes will be

• The vice-presidential debate on October 7 between Vice President Mike Pence and Joe Biden's running mate Kamala Harris, according to analysts.
• Federal Reserve's September meeting minutes, this will also be released on Wednesday.
• Any news regarding interest rate hike prospects progress on stimulus package
• In terms of data, there is the U.S. ISM non-manufacturing PMI on Monday and jobless claims on Thursday.

We have always seen that first two weeks of October are always good for gold. Firstly there I sell off post Labour data and in the domestic markets too, gold’s demand rises during the festive season. Gold generally rallies during this time.

And even if there is a fall in prices, investors still consider this dip as a buying opportunity for gold. Both ways, it will be a win-win situation for gold.

Investors believe that gold has the potential to climb back to $1980 over the uncertainties prevailing in the market.

Sentiments are strongly bullish for Gold

Time and again, gold has enjoyed a safe haven status, and in the current pandemic scenario, investors are always on the verge of safe places to park their funds. Hence sentiments for the yellow metal have grown bullish, supported by demand and hence some analysts believe that currently gold has been overbought.

Furthermore, weakness in the dollar and low U.S Treasury yields are expected to provide further support to gold. The price of gold has extended its correction from the record highs above $2 070, registered in the first week of August. Despite this, there is no reason to panic and as long the price of gold is above $1 800 this precious metal is in the “buy” zone confirmed the spokesperson from RSBL.

The price of gold may be ready to advance higher as Federal Reserve announced that will keep interest rates lower for longer to support the economic recovery

U.S Fed kept the interest rates unchanged, as expected. The latest FOMC statement and economic projections signal are that the interest rates will stay at zero until the end of 2023. This is excellent for gold. 

On Wednesday, the Federal Reserve issued a statement regarding the FOMC meeting, which was held from September 15-16. The US central bank kept the interest rates and the conditions of its quantitative easing unchanged

U.S. weekly jobless claims report on Thursday showed a smaller-than expected decline in new claims, weighing on the dollar and bolstering the appeal of gold as an investment alternative.

The unemployment rate is forecasted to be around 7.6 percent in 2020, compared to the 9.3 percent seen in June. The fact that the recovery has progressed quicker than expected is bad news for the gold prices. But still, the overall economic activity remains well below the pre-pandemic level.

U.S. data also showed that more Americans submitted unemployment claims than forecast, with 860,000 initial jobless claims against the estimated 850,000. The data also showed that almost 30 million Americans were claiming unemployment benefits as of the end of August.

When it comes to the PCE inflation, the FOMC now sees higher inflation in 2020 (1.2 percent) than June when they expected only 0.8 percent. However, the FOMC projects that the inflation rates will be below their target until 2023, which is an excellent excuse for continuing their dovish monetary policy, thus supporting gold prices while the dollar declines.

Last week's trading saw gold forming its high in Wednesday's session, here doing so with the tag of the 1983.80 figure. From there, a decent decline was seen into Thursday, with the metal dropping down to a bottom of 1938.20 - before bouncing off the same into the weekly close.

Gold prices gained on Friday buoyed by a weaker dollar and lingering concerns over an economic recovery from the damage inflicted by the coronavirus pandemic that were underscored by elevated weekly U.S. jobless claims data.

Spot gold climbed 0.6% to $1,953.80 per ounce during Fridays trading hours and was on track for a second straight week of gains, rising 0.7% during the day.

RiddiSiddhi Bullions Limited confirmed that sentiments are strongly bullish for gold as markets expected prices to rise higher and even hover in that zone for a long time.

An environment of negative real interest rates, uncertainty over the global economic future and global uncertainties, such as the upcoming U.S. presidential election, are among the reasons that have pushed investors to build up their gold holdings.

Meanwhile, in the domestic markets, market participants await prices to stabilise as the festive season begins.  Hopes prevail in the markets that demand might rise, over price stability.