Gold to eye $1800.
The surge in gold is set to continue with a test of $1800 the next big round number in sight. Technically we can see gold coiling up on the daily chart and looking set to break higher.
There are a number of very positive signs for gold to go higher over the next few months. Global holdings of gold backed ETF's have just hit a record high according to the World Gold Council. Key details from the report were:
- Gold ETFs saw the highest quarterly inflows for four years amid global uncertainty and financial market volatility. Holdings of these products reached a record high of 3,185t by the end of Q1.
- These investment inflows helped push the US dollar gold price to an eight-year high. Consequently, global gold demand in value terms reached US$55bn - the highest since Q2 2013. The price also reached new record highs in Indian rupees and Turkish lira, among others.
- The pandemic slashed jewellery demand as governments across the globe imposed lockdown measures. Demand fell to lowest on record, led by a 65% decline in China - the largest jewellery consumer and the first market to succumb to the outbreak.
- Central banks continued to amass gold, although we expect net buying to slow sharply. Amid heightened volatility and uncertainty, global gold reserves grew by 145t in Q1. But Russia announced that it would suspend its long-term buying programme from April, signalling a sharp slowdown in global net buying.
- Total Q1 supply fell 4% as coronavirus lockdowns hit mine production and gold recycling. Operations were halted at many projects in an attempt to stem the spread of the virus. And recycling ground to a near standstill towards the end of the quarter as consumers were confined to their homes.
A key takeaway for me here is that once lockdowns are lifted we can expect to see jewellery demand rise again. That, in conjunction, with more ETF buying should push gold demand much higher for the next quarter. Take a look at this chart below and look at the ETF and Jewellery levels of demand in particular.
The case for a higher gold price is underpinned by the prospect of low interest rates for years to come. The potential for currency debasement is high as fiscal stimulus and monetary policy measures are ramped up. Gold offers a place to seek Alpha.
The main question is how to time gold buying
You could buy a gold etf. That saves the issue of leverage if you buy in real money.
Another option would be to dip your toe in here with stops below $1636 and look for the break.
What can stop golds break higher right now?
A rise in fear and heavy equity selling will result in gold being pressured. The playbook around the COVID19 crisis has been that when equity markets sell, gold falls and the USD rises. So, any big shocks could keep gold moving sideways or cause it to fall. Aside from that, any further falls in volatility, will support higher gold prices.
