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  • DXY has been on the backfoot in the US session, supporting gold off its lows.
  • Gold moved between $1,650.36 the high to a low of $1,560.90 as margin calls kick in following deeper corrections on Wall Street.

Gold is trading at $1,570 having travelled between a range of $1,650.36 the high to a low of $1,560.90 as margin calls kick in following deeper corrections on Wall Street in the coronavirus panic. In the bid for cash, the precious meals caved in and Gold for April delivery on Comex fell by $52, or 3.2%, to settle at $1,590.30 an ounce, extending its decline to a third straight session. The markets are in panic mode which is seeing the yellow metal perform poorly in line with risk markets.

“Gold is experiencing further liquidity selling, but persistent investment demand continues to offer support,” analysts at TD Securities explained:

“The continued downward pressure on interest rates and the USD, and the asymmetric nature of central bank reaction functions, offer fundamental backing for the yellow metal throughout 2020 and suggests any dips toward the $1600/oz level or lower would represent ideal buying opportunities. While these short term runs to liquidity remain a risk in the near term, we note that positioning is becoming stickier at higher levels and the 2020 uptrend remains intact. With that said, gold remains the standout of the precious metal complex, and we expect the yellow metal will continue to outperform the other precious metals with industrial exposure and lower betas to monetary policy and safe-haven flows.”

Fed market operations which has risen the prospects of a QE again

Meanwhile, the DXY has been on the backfoot in the US session following Fed market operations which has risen the prospects of a QE again. In a bid to stabilise money markets, the New York Fed has offered $500 Bln in a three-month repo operation, to settle on March 13, 2020, in response to a squeeze on dollar funding (widening of the EUR cross-currency basis swap). The Fed started to shrink its balance sheet last year and has plenty of space to grow it back to the peak of 25% of GDP from levels near 19% today. Such prospects are weighing in the DXY which has fallen from a recovery high of 98.31 to a fresh NY session low of 97.19.

NY Fed Statement regarding Open Market Desk Operations on Thursday April 9, 2020:

Due to the Securities Industry and Financial Markets Association’s recommended market close on Friday, April 10, 2020, all overnight repurchase and reverse repurchase agreements and securities lending trades executed on Thursday, April 9 will mature on Monday, April 13, 2020. Additionally, any Treasury security purchases executed on Thursday, April 9 will settle on Monday, April 13, 2020. While the Open Market Trading Desk does not intend to conduct operations on April 10, the Fedwire Securities Service will operate during its regular hours on that date.

Gold levels

 

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