On Monday, April 13, gold prices surged by more than 1.5% at one point, reaching their highest level in over seven years, as panicked investors flocked to the safe-haven metal amid concerns that the coronavirus would deal a blow to the global economy and U.S. corporate earnings.

On Monday, during the early Asian session, spot gold opened at $1,681.99 per ounce, climbed as high as $1,722.60 per ounce, dipped to a low of $1,674.02 per ounce, and closed at $1,712.66 per ounce, up $23.76 or 1.41%.

COMEX gold futures rose 1.1% to $1,771.90 per ounce, hitting their highest level since October 2012 and closing at a new record high, before breaking through $1,772 to reach a more than seven-year peak.

“U.S. stock markets are experiencing significant volatility, and investors who can’t tolerate such swings continue to flock to the gold market,” said Phil Streible, chief market strategist at Chicago’s Blue Line Futures. “I still believe that future inflation is the primary driver of potential buying pressure for gold.”

Inflation is seen as bullish for gold, as the metal is viewed as a safe haven for preserving wealth when price pressures mount. Meanwhile, U.S. companies have entered a challenging earnings season amid the coronavirus pandemic, sending major Wall Street indices lower.

Last Thursday, the Federal Reserve announced a massive $2.3 trillion economic stimulus package to help address the pandemic. Since the week ending March 21, the crisis has already forced 16.8 million Americans to file for unemployment benefits.

Last Thursday, EU finance ministers agreed to provide €500 billion in aid to economies hit hard by the coronavirus, but they have yet to resolve how to fund the eurozone’s economic recovery. The eurozone economy is heading for a severe recession.

This pandemic has infected nearly 1.92 million people worldwide and claimed 119,090 lives, prompting countries to extend lockdowns and compelling central banks to announce support measures to mitigate financial losses.

“The deflationary impact of the COVID-19 pandemic has long been a headwind for gold. However, as policy responses from governments and central banks around the world gradually take effect, this trend is expected to reverse in the second half of 2020,” UBS analysts said in a report.

“Driven by the Federal Reserve’s policy easing, we now expect U.S. real interest rates to fall further into negative territory, potentially even testing the lows seen in the aftermath of the global financial crisis,” UBS said.

Lower interest rates also reduce the opportunity cost of holding non-yielding gold.

The world’s largest gold exchange-traded fund, SPDR Gold Trust, rose 0.6% on Thursday to 994.19 tonnes, reflecting market sentiment.

Fundamental bullish factors

1. According to data compiled by Worldometers, there are currently nearly 1.92 million confirmed cases worldwide, with 119,090 deaths. At least 441,232 people have recovered.

The United States has recorded more than 580,000 confirmed cases, leading the world with 583,411 cases and 23,462 deaths. Italy has nearly 160,000 confirmed cases—159,516—and over 20,000 deaths, making it the European country with the highest death toll. France has 135,779 confirmed cases and 14,967 deaths. Germany has 128,820 confirmed cases and 3,043 deaths.

The United Kingdom has surpassed China in the number of confirmed cases, with 88,621 reported so far, and at least 11,329 Britons have died from the disease. China has reported 81,160 infections and 3,341 deaths. Iran is another hotspot, with 73,303 confirmed cases and 4,585 fatalities.

2. The U.S. Consumer Price Index fell 0.4% in March, marking the largest monthly decline in five years, as Americans cut back on travel and prices for gasoline, airfares, and hotel rooms dropped sharply. According to data from the U.S. Department of Labor, March saw the biggest drop since January 2015. Excluding food and energy, the core CPI declined 0.1% in March, the first monthly decrease since January 2010.

3. On Thursday, the Federal Reserve announced a series of new measures aimed at providing an additional $2.3 trillion in financing to businesses and cash-strapped governments. According to the initially outlined terms, these loans will be available to firms with no more than 10,000 employees and annual revenue not exceeding $2.5 billion as of 2019. Principal and interest payments will be deferred for one year. The Fed stated that the total value of these programs will reach $2.3 trillion, encompassing the Paycheck Protection Program and other initiatives designed to provide funding to small businesses, as well as measures to bolster municipal finances through a $500 billion loan program.

Federal Reserve Chair Jerome Powell stated that the Fed will continue to employ all available tools until the U.S. economy has fully recovered from the damage caused by the COVID-19 pandemic.

4. Data released by the U.S. Department of Labor on Thursday showed that, amid the impact of the coronavirus pandemic, unemployment continues to rise, with 6.6 million Americans filing for unemployment benefits for the first time last week. This brings the total number of initial claims over the past three weeks to more than 16 million. When compared with the 151 million employed reported in the previous monthly employment report, it becomes clear that the U.S. has lost 10% of its workforce in just three weeks.

5. In April, the University of Michigan’s Consumer Confidence Index came in at 71, below the expected 75 and down from the previous reading of 89.1. Lockdown measures implemented to curb the spread of COVID-19 have led to widespread business closures and even bankruptcies, resulting in a sharp rise in unemployment. The heightened uncertainty surrounding these developments has caused consumer confidence to plunge.

Fundamental bearish factors

1. On Sunday, Dr. Anthony Fauci, Director of the U.S. National Institute of Allergy and Infectious Diseases, stated that some parts of the United States may reopen as early as next month, expressing cautious optimism about the slowing of the epidemic in the country. He noted that there are “indications” suggesting that certain key metrics used to assess the crisis are “beginning to stabilize” in some areas. When asked when certain regions might start easing strict social-distancing measures, Fauci said the process could begin “at least in some respects, possibly as early as next month.”

2. New York Governor Andrew Cuomo has invited other states to join a six-state pandemic response coalition, coordinating with the governors of New Jersey, Connecticut, Pennsylvania, Delaware, and Rhode Island on the process of reopening. He stated: “The worst may be over. We can now look forward to a coordinated reopening across states, but it must be implemented prudently.”

3. Italy reported 3,153 new COVID-19 cases, the lowest daily tally since April 7, bringing the cumulative total to 159,516.

4. U.S. President Donald Trump said Friday that he expects the death toll from the novel coronavirus to be “significantly lower” than the previously estimated 100,000. He noted that states such as New York have recently reported declines in hospitalizations and that the number of new cases nationwide is leveling off, “which basically indicates we are nearing the peak.”

5. An influential model that tracks the U.S. coronavirus pandemic now projects lower death tolls and reduced demand for hospital beds compared with last week’s estimates. On Tuesday, the model projected about 82,000 deaths from COVID-19 by August; by Wednesday, that estimate had been revised down to 60,415.

Market Outlook

1. Many analysts have been comparing gold trading patterns during the COVID-19 crisis with those during the 2008 financial crisis, predicting that gold prices will reach new record highs. Scotiabank has now joined this group, estimating that the current rally will surpass the bull market of 2009–2012. However, in its latest update, Scotiabank notes that the key difference is that this cycle will be shorter. Nicky Shiels, Scotiabank’s commodity strategist, wrote last Thursday: “Sometimes consensus trades are spot on; this time, the trajectory increasingly resembles a ‘Nike Swoosh’—a dip to $1,450—suggesting a more bullish (yet also shorter) move than the 2009–2012 bull market.”

2. “Over the past two to three weeks, gold prices have been on an upward trend, driven primarily by safe-haven buying amid growing concerns that the global economy could slip into a recession due to the COVID-19 pandemic,” said Hareesh V, Head of Commodities Research at Geojit Financial Services.

3. FXStreet analyst Rajan Dhall writes that, on the weekly chart, price has now broken above the previous high of $1,703.27. This is a significant development, as it now establishes a new higher high and a higher low. The next major resistance level is around $1,800, indicated by the blue horizontal line. Should price break through that level again, the next key hurdle will be $1,912.14, marked by the red line—the all-time high. Dhall notes that a close look at the technical indicators reveals a bearish divergence in the RSI, suggesting that the upward momentum may be losing steam. While he does not believe this alone provides a strong enough rationale to close a long position, it is nonetheless something to keep an eye on. On lower time frames, short-term pullbacks are always possible, which could present an opportunity to enter the trend.

4. Phil Flynn, senior market analyst at Price Futures Group, said he expects holiday-related funds to begin returning to the market, as fund managers focus on the fiscal and monetary stimulus measures aimed at boosting the economy and markets—measures that, he noted, are providing support for gold. Flynn stated: “We anticipate that these funds will come back as people return from their vacations. I believe we’ll see long positions start to accumulate.”

5. George Gero, Managing Director at RBC Wealth Management, also stated that he expects bullish interest in the market to increase. “I anticipate greater volatility,” Gero said. “However, I expect gold price swings to occur at progressively higher levels.”

Key Focus on Tuesday

10:00 China March Trade Balance

10:50 China’s March Trade Balance in USD

20:30 U.S. March Import Price Index Month-on-Month

20:30 IMF Releases World Economic Outlook Report

23:30 IMF Releases Global Financial Stability Report

To Be Determined: Texas Oil Regulatory Agency to Hold Meeting

At 04:30 the next day, U.S. API crude oil inventories for the week ending April 10