I must say that since the coronavirus outbreak started I can interact with more people, especially with my friends I haven’t seen in a long time, through social media and other digital applications than I used to during the post-pandemic times. With one of those friends of mine, we are trying to provide people with further insight about the current situation in markets.
As oil prices have moved into positive territory last week, stock and commodity markets are improving as well.
On Friday, everyone watched gold price exceed the resistance level just above 1700 dollar per ounce. And finally, just as expected, gold closed at the highest value for the first in five years. This weekend, one of my closest friends, Dan Levent and I made a 90 minute-live broadcast on social media to tackle this very issue. Here’s a brief summary of what we have discussed online:
First of all, it is highly anticipated that gold price will hit 4000 USD per ounce in June 2021. It’s hard to guess whether gold will show such a rapid trend but it’s obvious that people have quite positive expectations about gold prices.
Dan Levent pointed out that Russia, China and the US are the top three actors in gold market. It is known that there are 1948.31 tonnes of Gold reserves in China as of the fourth quarter of 2019 meanwhile the United States has more than 8,000 metric tons of gold. However, according to market rumours, China has been constantly increasing its gold reserves. Unconfirmed sources say that China has 30,000 tonnes of gold in reserves.
Continuing to increase its reserves, China avoids selling gold to foreign countries. According to experts, China is planning to make Yuan become a global reserve currency with gold backing.
“Expansionary monetary policy, again…”
The reason why experts believe that gold price will increase soon is because they know the Fed is currently using its expansionary monetary policy again to stimulate the economy. For instance, from 2008 to 2015, the Fed’s balance sheet ballooned from $900 billion to $4.5 trillion. Those numbers helped push up the unemployment rate to 3.5% while stimulating markets, commodity and other asset prices. But then all hell broke loose when U.S. Secretary of Treasury said that the Fed should withdraw $600 billion cash from market.
Expanding over time, today the Federal Reserve’s balance sheet reaches $6.5 trillion as a result of the coronavirus crisis. Dan Levent said: “FED is expanding its balance sheet by 1 million USD per second since the crisis started. So, there’s no need to be optimistic and expect a decline in gold prices”
Obviously, anything can happen in markets but Gold and other Precious Metal prices are quite likely to surge especially now that a huge amount of cash is injected to markets and governments are declaring that everything will go back to normal soon. All of this may even push silver, which was standing in a corner silently, to soar on markets.
