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  • Gold taking on the bears through recent resistance structure.
  • The yellow metal is bid regardless of cautiously optimistic market tones.
  • A key week ahead sees OPEC meeting, Fed and ECB minutes and Europgrop bailout discussions. 

cDespite a bid in the stock markets and a sense of hope pertaining to less pessimistic weekend COVID-19 headlines, the price of gold is on the rise, adding over 2% at the start of the week, piecing a significant resistance along the way. At the time of writing, gold is trading at $1,654.30 between a range of $1.609.11 and $1,657.30 and at the highest levels since 26th March’s top of $1,645.50. 

Markets have started out in the week with an optimistic tone as virus cases are starting to slow according to weekend updates; more on those here: COVID-19 Updates: A crucial week ahead for the debacle. However, the market will continue to watch the rate of the spread of COVID-19 for direction and while the price action is obscure, gold will remain a bid so long as the stimulus keeps coming and uncertainty plays on within the COVID-19 debacle.

“We think the set-up for a multi-year bull market is being cemented as the market is awash with both monetary and fiscal stimulus while rates are at the zero bound, which suggests investors will continue to seek gold’s warm embrace as real global rates become entrenched in negative territory,”

analysts at TD Securities argued. 

Meanwhile, there are big questions over the banking sector in Europe and the US for that matter when considering Deutsche Bank’s inherently toxic balance sheet and poisonous tentacles within the global banking sector.

While it could be argued that the banks came into the coronavirus pandemic much stronger than they went into the global financial crisis, it is whether their capital and liquidity buffers will be sufficient in a pandemic of bad corporate loans in the most dramatic economic crash in history is where markets should be focussed.

This is a matter which could prove to be the next catalyst for a major turn of events in financial markets which would trigger the next round of safe-haven flows to potentially rocket gold higher within what appears to be the making of a multi-year bull market being cemented. 

Key week ahead

As for the week ahead, there will be an immediate focus on Tuesday’s Eurogroup meeting as well as Thursday’s OPEC meeting, and the latest sets of Fed & ECB Minutes. Here are the key points to these events

  • Euro-area finance ministers meet to discuss concrete proposals for a euro-area bailout program.
  • CNBC quoted the head of Russia’s sovereign wealth fund Kiril Dmitriev as saying that Russia and Saudi Arabia were “very, very close to a deal”.
  • The minutes will cover the unscheduled meetings resulting in rate cuts on March 3 and March 15 (150 bps in total) as well as any other FOMC-wide discussions through March 15. “The tone should portray a Fed ready to use all tools to alleviate stress in markets and to limit the severity of the recession. Open-ended QE and several 13(3) programs were announced after March 15,” analysts at TD Securities explained. 

Gold levels