The price of gold in US Dollars is currently at its highest level in seven years at 1,676 Dollars. The sharp rise is also clearly visible in the long-term chart at the end of this article, which goes back ten years. What has currently happened? Last week alone, the price of gold rose by more than 60 Dollars to 1,643 Dollars. Then from Friday evening to this morning the big jump, further up. With currently 1,676 Dollars, gold is only 4 Dollars away from its absolute high this morning. What a rally. What’s going on there?
Gold price fully in Risk Off mode
Gold is currently really strong in Risk Off mode. Investors are fleeing risky assets such as equities into the safe havens, i.e. primarily Gold. And as you could see over the weekend, the coronavirus has also spread to Italy. Several towns and villages have been sealed off, football matches and carnivals have been cancelled. So now the corona virus threatens to paralyze social and economic activity in Europe as well (here is the current commentary by Markus Fugmann). Of course, this immediately causes fear on the stock market (it already slowly picked up speed last week). Less consumption and less travel threaten sales in almost all economic sectors. The Dax opens today 340 points lower than Friday evening. The Dow 30 is currently 560 points lower than on Friday evening! And so the Gold price as a refuge can profit from this fear over the weekend with a plus of 33 Dollars! (Gold price trend in the following chart since February 12th)
Comments from analysts
The analyst community is partly even surprised by such a fast and strong rise in the Gold price. Here are some comments. Ipek Ozkardeskaya, Senior Analyst at Swissquote Bank, mentions that risk capital has flowed into the precious metal. Technical indicators would suggest that Gold has been overbought for at least three weeks, but that risk appetite is so fragile that even sky-high prices do not stop capital from flowing into the precious metal. Milan Cutkovic, market analyst at AxiTrader, said succinctly “safe havens remain in demand, the price of Gold knows no stopping”. Jasper Lawler, Head of Research at London Capital Group, mentions his own view last Thursday that in the most optimistic scenario Gold could rise as high as $1,650. But now Gold has risen to $ 1,680 overnight. There will undoubtedly be some profit taking around $1,700. One does not see the logic for doing this before reaching the 2011/12 peaks, which are closer to $1800.