Gold is getting weighed down by higher equities and a stronger US dollar; however, talk of fresh stimulus initially reversed the losses while the easing of lockdown measure continues to limit the upside over the near term.
The balance of risks still favours gold going higher and, at this stage, it’s hard to see what’s changed for gold to shift appreciably lower.
European assets, including the EUR, are on the defensive as markets try to digest the German Constitutional Court’s ECB ruling. There’s widespread concern that a premature end to the lockdown will increase fatalities and see retail demand flooding into gold ETFs.
Although the curve is flattening, Covid-19 remains the hot ticket for gold even if the White House’s contention that the Wuhan lab is the epicenter for the virus outbreak is not viewed as credible. Just the mere thought that US -Sino relations could take a turn for the worse should support gold on dips.
Gold positioning continues to hover near the highs as prices consolidate around $1700 as the market is sitting tight, awaiting the primary catalyst. In addition, some big gold buyers are sidelined while looking to gauge the risk markets’ reaction to how gradual reopening activities play out with fast money, ready to pounce on the first sign of secondary cluster break out.
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Sometimes you have to throw conventional wisdom out the door and just let the good times roll