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Thursday, 8 October 2020

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.

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