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Gold pricing soars above recent resistance as second wave of pandemic hits

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Gold pricing surged to higher ground today, as renewed concerns about a second wave of the pandemic triggers concerns leading to safe haven demand.

According to the Associated Press and Time magazine, the World Health Organization (WHO) on Sunday, reported “the largest single-day increase in coronavirus cases by its count, at more than 183,000 new cases in the latest 24 hours.” The WHO reported the largest single-day increase in COVID-19 cases by its count, at more than 183,000 new cases in the latest 24 hours.

Time reported that, “The U.S. has the world’s highest number of reported infections, over 2.2 million, and the highest death toll, at about 120,000, according to Johns Hopkins. Health officials say robust testing is vital for tracking outbreaks and keeping the virus in check.”

The global pandemic has now infected 8,708,008 individuals, with 461,715 total deaths worldwide. On Sunday the U.S. lost almost 5,000 souls in a single day accounting for over two thirds of Sundays death toll.

Since the middle of March when gold hit a low of approximately $1450 per ounce, we have seen a methodical rise in gold pricing. Then from the middle of April gold began to trade range bound with defined tops at approximately $1750 per ounce.

As of 4:45 PM EST gold futures basis the most active August contract is currently up by $12.80 and fixed at $1765.80. This closing price is the highest price close on a weekly chart since October 2012. It is the highest daily close since April 14 of this year. The gains realized in the August futures contract today was composed primarily of dollar weakness, coupled by traders bidding prices higher. The dollar index is currently trading off by 0.61%, with gold futures trading up by 0.68%, which confirms that gains today were a combination of both buying and dollar weakness.

The same cannot be said for physical or spot pricing. According to the KGX (Kitco Gold Index) physical gold is currently up $11.70 and fixed at $1755.20. Of the net gain today of $11.40, $11.70 was the net gain in physical gold from dollar weakness with mild selling pressure accounting for a small decline of $0.30 per ounce.

Friday’s CFTC’s Commitment of Traders (COT) report indicated that institutional money managers have been adding long positions in gold futures to their portfolio. Carsten Fritsch, Commerzbank analyst said that, “data for the week through June 16 showed the first increase in speculative net length in four weeks. During the previous reporting week, the net-long position had fallen to the lowest level since May 2019.” Friday’s report indicated that net long positions in gold held by money managers rose to 104,688 futures contracts. This is a net increase of 13,511 100-ounce Comex contracts.

With the current accommodative monetary policy and interest rates near zero by the Federal Reserve, the US Treasury Department’s $3 trillion outlay to pay for aid packages, and the renewed concern of a second wave of the novel coronavirus have reignited interest in gold as a safe haven asset. While I am still projecting that gold will reach $1800 by the fourth quarter of 2020, Goldman Sachs raised its 12-month forecast by 11% to $2000 per ounce within the next 12 months.

Wishing you as always good trading and good health,

Gary S. Wagner - Executive Producer