The last phase of this rally started a week ago when on Thursday 15 April, gold futures opened at 47350 and rose 500 on the day. This was followed by an acceptable 43 profit last Friday. This week, gold hit a high of 47850 before moving ahead under mild selling pressure. Today is the first decline in the price of nine dollars since Monday of this week.
This most recent rally in gold began at the end of March when market participants valued it at around 43320, forming twice the lows seen on March 8. Moderate, given recent gains in April.
More significantly, the underlying fundamental events of the gold price change have a drastically accelerated impact on the safe-haven asset class.
The root of many issues stems from economic contractions in some countries worldwide, as well as a major increase in Covid-19 infections in some global hotspots. While economic data outside the United States indicate continued economic growth, globally, there are signs that the European Union and other countries are not reversing as quickly as the U.S.
The US Department of Labor reported that benefits claims fell from a revised number of 586,000 a week earlier to 574,000 the previous week. This is the second consecutive week that has resulted in a steep decline in unemployment claims.
It was recently reported that the economy in the European Union declined by 0.7% in the last quarter of 2020. More worryingly, Lagarde stated that “the coming economic data suggest that activity may contract again in Q1. The ECB’s president noted that there is a chance for growth again in the second quarter.” According to Anna Golubova of Kitco News.
The build-up by Russian troops on the Ukraine border continues to grow.
In India, the crisis of new Covid-19 infection is astronomical. Today the Associated Press reported that India recorded more than 314,000 new Kovid infections on Thursday alone. Given that India is the second-most populous country in the world, this number takes India’s collective Kovid cases to 15.9 million. The Associated Press also stated that currently their healthcare infrastructure is overwhelmed due to a lack of hospital beds and oxygen.
US equities also tumbled as of today as market sentiment increased from $ 1 million per year to around 50% to raise federal income tax for those focused on Biden’s new tax proposal. The Dow Jones Industrial Average gained 321 points or 0.94% to close at 33,815.
The concerns that air this most recent leg of the rally continue to mount. As such, we would expect any shallow plunge in gold prices to at least survive. While we can see a consolidation at these new price levels, gold likely enters another corrective period based on current fundamental events that have underpinned the recent rally.