Price of Gold Fundamental Weekly Forecast – Global Recession Fears Providing Long-Term Support

Gold finished lower last week after putting in a mostly mixed performance most of the week. The price action reflected the sideways to lower performance in the U.S. equity markets, while gains were capped by renewed demand for the U.S. Dollar. Nonetheless, expectations of additional government fiscal support and central bank monetary stimulus due to a global recession should continue to unpin the market and likely lead to higher prices.

Dollar Caps Gains

The dollar advanced last week as investors stared at will likely be one of the worst economic contractions in decades as the world confronts the coronavirus pandemic. The greenback, the world’s leading global reserves currency, rose against all major currencies as selling in global equity markets highlighted growing risks from the pandemic that shows little sign of easing.

There was some end of the month dollar buying early in the week, but later in the week, we saw safe-haven buying. Analysts said coordinated action by central banks to boost dollar supply has helped calm extreme volatility, but money markets still need time to settle.

Gold Hits Weekly Low after Trump’s Dire Warning

Gold seemed to reach its low for the week after U.S. President Donald Trump’s dire press briefing late Tuesday where he warned Americans of a “painful” two weeks ahead in fighting the coronavirus even with distancing measures.

White House coronavirus coordinator Deborah Birx displayed charts demonstrating data and modeling that showed an enormous jump in deaths to a range of 100,000 to 240,000 people from the virus in the coming months.

US Economic Data Suggests Damage Will Worsen

On Wednesday, the ADP National Employment Report showed private payrolls fell by 27,000 jobs last month. On Thursday, the government reported that in the week-ending March 28, 6,648,000 Americans filed for unemployment, doubling the previous week’s 3.28 million figure, which was itself a record high by a significant margin.

Gold prices edged higher on Friday after gloomy U.S. non-farm payrolls data magnified the economic toll from the coronavirus. The U.S. economy shed 701,000 jobs in March, ending a historic 113 straight months of employment growth, as stringent measures to control the coronavirus outbreak hurt businesses and factories, confirming a recession is underway.

Weekly Forecast

The conditions are ripe for a rally, but with supply tightness easing and investors moving more money into the highly liquid U.S. Dollar, buyers are struggling to add new positions at current price levels.

That’s the short-term outlook, longer-term the economic data suggests gold will be supported and likely move higher due to expectations of further fiscal and monetary policy stimulus.