Gold Price Touches the Record Again
Gold prices surged on Tuesday. On the Comex market in New York, gold price reached a high of $1,554.30, or 4.6% compared to Monday’s close, up to $67.80 an ounce. It marked the most significant one day increase since June 2016, when Britains voted to exit the European Union.
Bob Haberkorn, senior market strategist, RJO Futures says that gold is starting to act like how it should perform.
Over the past week, gold has been on a wild ride. The metal dropped as low as $1,450 an ounce Monday. After a brief record of a seven-year high above $1,700 a week earlier, it slid a $250 an ounce.
The latest action by the US Federal Reserve contributed to the surge of gold.
It rolled out a new Primary Dealers Credit Facility. It allows banks, the Treasury Department, and the financial system to get short-term loans. Primary dealers can support smooth market functioning.
Bob Haberkorn stated that Federal Reserve’s action is putting out more liquidity in the market. And has helped gold to trade higher.
On the other hand, the Trump administration announced a massive stimulus program. The White House shifted towards a more aggressive response to the pandemic by an economic assistance package of more than $800 billion.
It convinced investors that gold’s status as a haven asset and inflation hedge stays intact.
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Gold Prices Are Likely to Remain Volatile
Gold usually operates well in an environment of rising inflation expectations, falling interest rates, and ultra-loose monetary policy.
On Tuesday, The Federal Reserve announced that the 2008 financial crisis-era purchasing program of short-term corporate debt started again.
Global central bank stimulus, including an emergency rate cut to zero percent by the Federal Reserve, also bolstered gold’s prospects. On the other hand, the leaders of the G7 nations pledged to do whatever is necessary to respond to a global slowdown.
Michael Matousek, head trader at US Global Investors, said that gold had got a lot of significant factors behind it to support its drive higher. Additionally, you do have the technical aspect of it, given the drawdown we had over the past two days. It is an excellent opportunity for people to enter the gold market, the trader stated.
Goldman Sachs analysts said in a note that in the short term, the gold price is expected to remain volatile as it attempts to find a new equilibrium.
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