A Golden Opportunity

Gyrations in equity market have continued overnight as the S&P 500 rallied +6%, recovering exactly half of its losses from the previous session on details of a substantial U.S. fiscal spending package.

The proposed $1.2 trillion stimulus package is equivalent to approximately 5.5% of U.S. GDP and exceeds considerably the earlier rumours of an $850bn package. Notably, the proposed package will include direct payments to individuals and business at the end of April ($250bn), to be followed by another direct payment four weeks later ($500bn) assuming there is no de-escalation in the Covid-19 pandemic.

The prospect of such a large dose of stimulus working in tandem with the recent easing measures announced by Central Banks should ease fears of a deep and protracted Covid-19 recession. In due course, it should suppress some of the recent volatility and ensure a return to more normal trading conditions. Based on this reasoning, I would like to update our view on gold.

In our past two Week Ahead videos, we have warned about the downside risks in gold. Partially this was due to the extended long position that was vulnerable as funds were forced to cut positions to remain within risk limits and to return money to investors.

It also lent heavily on technical analysis. After a strong run higher in recent months, we were looking for gold to commence a retracement which we said in last week’s video at around the 9-minute mark

“could come back to the $1445 region, quite easily…and that would not dent the bigger picture uptrend.”

After this weeks pullback to the $1451 low that neatly tagged the 38.2% Fibonacci retracement of the rally from the $1046 low from 2015 to the $1703 high from two weeks ago and with positioning much cleaner after the recent flush AND with more fiscal and easing reasons than previously, we feel gold is well placed to recover lost ground.

Providing gold remains above this week's $1450 low, a break and close above $1560 would be initial confirmation the uptrend in gold has returned, targeting a move towards $1800.

Source Tradingview. The figures stated areas of the 18th of March 2020. Past performance is not a reliable indicator of future performance. This report does not contain and is not to be taken as containing any financial product advice or financial product recommendation

From time to time, StoneX Financial Pty Ltd (“we”, “our”) website may contain links to other sites and/or resources provided by third parties. These links and/or resources are provided for your information only and we have no control over the contents of those materials, and in no way endorse their content. Any analysis, opinion, commentary or research-based material on our website is for information and educational purposes only and is not, in any circumstances, intended to be an offer, recommendation or solicitation to buy or sell. You should always seek independent advice as to your suitability to speculate in any related markets and your ability to assume the associated risks, if you are at all unsure. No representation or warranty is made, express or implied, that the materials on our website are complete or accurate. We are not under any obligation to update any such material.

As such, we (and/or our associated companies) will not be responsible or liable for any loss or damage incurred by you or any third party arising out of, or in connection with, any use of the information on our website (other than with regards to any duty or liability that we are unable to limit or exclude by law or under the applicable regulatory system) and any such liability is hereby expressly disclaimed.

FOREX.com is a trading name of StoneX Financial Pty Ltd.

The material provided herein is general in nature and does not take into account your objectives, financial situation or needs.

While every care has been taken in preparing this material, we do not provide any representation or warranty (express or implied) with respect to its completeness or accuracy. This is not an invitation or an offer to invest nor is it a recommendation to buy or sell investments.

StoneX recommends you to seek independent financial and legal advice before making any financial investment decision. Trading CFDs and FX on margin carries a higher level of risk, and may not be suitable for all investors. The possibility exists that you could lose more than your initial investment and CFD investors do not own or have any rights to the underlying assets.

It is important you consider our Financial Services Guide and Product Disclosure Statement (PDS) available at www.forex.com/en-au/terms-and-policies/, before deciding to acquire or hold our products. As a part of our market risk management, we may take the opposite side of your trade. Our Target Market Determination (TMD) is also available at www.forex.com/en-au/terms-and-policies/.

StoneX Financial Pty Ltd, Suite 42.01, 264 George Street, Sydney, NSW 2000 (ACN 141 774 727, AFSL 345646) is the CFD issuer and our products are traded off exchange.

Delayed London Stock Exchange (LSE) Data

The London Stock Exchange (LSE) market data displayed or referenced on this website is provided on a delayed basis and is not in real time. The delay period may vary but is typically at least 15 minutes. This data is intended for information purposes only and should not be relied upon for trading, investment, or other financial decisions. We do not guarantee the completeness, reliability, or suitability of the data for any particular purpose. Users should consult real-time data sources and obtain professional advice before making any financial decisions.