Insights

Our Head of Research, Juan Carlos Artigas, discusses tail hedging during a crisis in this Asset TV video.

In this podcast, Krishan Gopaul, of our research team, discusses gold with Andrew Monk from VSA Capital.

Recent indications suggest that the coronavirus (COVID-19) outbreak in China appears to be virtually contained. Even though there are still new imported infection cases, China’s reported local infections have remained near zero for a significant period.

Read these daily gold market updates by John Reade on Twitter.

In this blog post, read a collection of Tweets from John Reade on gold.

In this webinar, our Chief Market Strategist, John Reade and Chief Investment Strategist at State Street Global Advisors, Michael Arone, discuss the global impact of COVID-19 and whether gold can help manage this unprecedented market volatility.

Topics include:

• The effect of government policies to control the pandemic on the global economy
• Impact of liquidations, fight-to-quality and monetary policy on gold
• Outlook for the remainder of 2020

The US Federal Reserve (Fed) announced an emergency 50bp rate cut yesterday, bringing the Fed funds rate down to a 1-1.25% range, in response to ongoing concerns about the potential impact of the coronavirus outbreak to the global economy. Treasury bond rates followed suit, with the 10-year note hovering 1% at the time of writing – an all-time historical low

The stock market embraced the weakest one-week performance since the financial crisis last week on the back of growing concerns of the continued spread of the coronavirus across the globe. Despite the risk off-moves, gold was lower by more than 3% last week, which is historically unusual during these types of movements. There are a few potential reasons for the weakness.

At the end of January, the new head of the European Central Bank (ECB), Christine Lagarde, announced the launch of a year-long strategic review of the bank’s monetary policy strategy. Stemming from this, there has been much discussion recently about the ECB’s existing “below but close to 2%” inflation target, and whether this needs to be made more specific, both in aim and measurement. 

“It just doesn’t get any bigger than this”. At least that is how President Trump is portraying the signing of the “Phase One” deal with China last week. But while talks between the two nations are undoubtedly positive for global trade, do they really make a substantive change in circumstances?

Gold stands apart from the broader commodities complex because of its unique market dynamics and performance drivers.

Gold rallied nearly 4% in December, mainly in the second half of the month, and recently moved to an intraday high of US$1,613/oz as the US-Iran confrontation unfolded. We believe there are a few likely reasons for the move...

As 2019 comes to an end and 2020 begins, we believe that:

• Financial and geopolitical uncertainty combined with low interest rates will likely continue supporting gold investment demand
• Net gold purchases by central banks will likely remain robust even if they are lower than the record highs seen in recent quarters
• Momentum and speculative positioning may keep gold price volatility high
• Gold price volatility and expectations of weaker economic growth may result in softer consumer demand near term
• But structural economic reforms in India and China will support demand in the long term.

Note: our comprehensive annual Outlook will be published by mid-January 2020.

The gold price has risen more than 15% this year against a backdrop of falling interest rates, economic uncertainty and geopolitical tensions. Dr Lu Zhengwei, Chief Economist of China Industrial Bank, Chief Economist of Huafu Securities and Vice Chairman of China Industrial Bank Research Limited, looks back in time to forecast the future for gold.