Gold is having one of its hottest runs in recent history this week
Gold is set for its best close since 2013 but the over 6% gains this week is even outpacing that of February 2016 and October 2011 – two of the more standout weekly performances in recent history for the commodity.
Gold is up by 1% today, closing in on $1,690 and with the capitulation in Treasury yields and more global central bank easing set to follow in the coming days/weeks, there is little reason for gold not to shine; a weaker dollar also helps.
Given that equities are still selling off, I reckon there will still be some propensity for gold to chop around intraday amid some selling due to hedge funds and big players needing liquidity to meet margin calls and what not.
But with global bond yields moving lower and real yields starting to turn negative, it continues to set up a compelling argument for gold to keep running higher over time.
The backdrop of the virus outbreak becoming more widespread and threatening a much larger economic fallout – potential recession risks – will also keep bids in gold.
The only thing to be mindful about is that this is slowly turning out to be the consensus trade in the whole coronavirus saga. As such, pullbacks and retracements can be sharp and scary if there is reason for investors to take money off the table.
However, in the bigger picture, as long as the current situation keeps up, this week’s performance may just be the beginning of a monstrous run for gold.