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When considering the precious metals market, we’ll mainly focus on gold.
The thing is that growth or decline in demand for other metals largely depends on production activity.
In the meantime, Markit’s latest estimates show the biggest decline in the manufacturing sector.
In some countries, the Purchasing managers’ index has fallen below the levels of the real estate crisis in 2008-2009.
According to data for May:
In June the situation became better, nevertheless the risks of the second wave of pandemic are quite high.
Gold, traditionally continues to be perceived by market participants as a safe haven asset and reasonably so.
This is primarily because of monetary policy.
Interest rates are close to zero levels and markets are pumped with “money steroids” called Quantitative Easing (QE).
The M1 Money supply in most developed countries rose sharply in 2020.
Besides a fall in the interest rate and “helicopter money”, the United States also launched support for the corporate sector with corporate debt buyback and bridge lending.
The Fed is taking exceptional measures to keep companies afloat.
In this case, as experts rightly note, injecting money into corporations essentially prevents a mass wave of bankruptcies.
On the other hand, companies in turn operate like zombies, which destroys any fundamental basis for potential investments.
The consequence of this is a huge inflow of funds into ETFs for gold.
Experts note that in January and February, it had already equaled half of the inflow for the entire previous year.
Secondly, political risks have contributed.
For President Trump, this year is proving to be very difficult.
A pandemic that has placed many large American companies at risk as well as the threat of impeachment initiated by the Democrats back in September of last year, a huge rise in unemployment, and now riots.
Next, it is important to note that the pandemic is likely to continue.
We have to keep in mind that there is the possibility of a second wave of infections and a risk of re-infection, which is currently
being actively studied by epidemiologists.
In the event that quarantine measures start again, investors may again rush to protective assets.
Price targets for GOLD:
- R1 $2080, R2 $2470
- S1 $1910, S2 $1840, S3 $1750
Summary of gold
We are optimistic about the market and believe that investing in gold is a good alternative now for long-term investment strategies.
Original Source: This article is provided by OlympTrade.