Intraday Market Thoughts

Metals Broaden Rally, USD Extends Slide

by Adam Button
Apr 14, 2020 19:45

Gold broke the March highs to resume its rally for the 4th straight day, hitting an 8-year high of $1747. USD funding stress eased further, prompting traders to revert towards proactively buying metals. Silver continue to rise vs Gold and USD as XAGUSD further broke Feb trendline resistance. especially as the US deficit is widely estimated to reach $3.8 trillion this year with debt hitting 100% of GDP. As equities show more optimism on slowing growth of corona virus cases, will the same rationalisation applies to the upcoming dismal earnings season? A new Premium trade was issued earlier, supported by 3 charts and notes.

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Metals Broaden Rally, USD Extends Slide - Gold Netflix (Chart 1)

Oil extended its decline as markets returned from Easter Holiday, with US crude losing for the 3rd straight session to hit $20.30. Oil pushed higher early Sunday night, only to get slammed back down and then chop sideways to finish unchanged on Monday. But Tuesday proved a different story amid doubts with China's demand.

Virus news was largely more of the same but some talk of lifting some lockdown restrictions in May in the US and Europe was positive, though not really reflected in markets.

Today's rally in equities was led by consumer discretionary stocks and technology, with these two as the only losing sectors.

The notable directional move came in gold as it rose above the March highs to the best levels since 2012. The reality of central bank balance sheets and government deficits is dawning on the market and ETF flows show a steady bid in oil. Overlooked is that the worst-case virus scenarios have probably been avoided – things like government collapses and general panic. That diminishes the risk of liquidation of gold reserves, at least for now.

Technically, gold shows little major resistance until the all-time highs. Futures also continue to trade at a premium to spot in what's likely a sign that physical holders don't want to sell because of the difficulty in delivering right now.


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