Gold’s one-day dollar surge is one for the record books. But as bullion deliveries hit a snag and mining operations slow, the precious metal may soon see prices rally to new heights.
On Monday, the most-active April gold futures contract GCJ20, 2.226% rallied by $83, or 5.6%, to settle at $1,567.60 an ounce. The one-day dollar gain for the metal was the largest ever, based on data going back to November 1984, according to Dow Jones Market Data.
The move for the metal followed the Federal Reserve’s decision Monday to unleash its balance sheet and purchase an unlimited amount of Treasurys and securities tied to residential and commercial mortgages to ward off a credit crunch, a process known as “quantitative easing” that aims to pump liquidity into frozen financial markets.
Unlimited quantitative easing is a “huge signal, another part of upcoming trillions of new debt monetization,” said Peter Spina, president, and chief executive officer at GoldSeek.com. “Many on Wall Street are waking up after the shock” of declines in recent weeks.
“The endless QE to trillions in global liquidity programs are all in gold’s favor among the general turmoil,” he told MarketWatch. “Gold is returning to its function as a global currency.”
Spina said he would not be shocked if gold moves up $1,700 an ounce by “Friday of this week or next,” and a gold price of $2,000 and higher are possible in the second quarter.
The market may also see a “perfect storm for a super price spike” in the coming months as the supply chain for physical gold bullion breaks down,” he said. There are “going to be difficulties sourcing new supplies in a hot market.”
Demand for bullion has been surging for “many weeks” but refiners are closing down, and miners are shutting production, due to COVID-19 lockdowns, he said. “So with a true gold rush underway, there is a perfect storm brewing for the gold and gold miners.”
Three of the world’s largest gold refineries—Valcambi, Argor-Heraeus, and PAMP—said Monday that they have suspended production in Switzerland for at least a week on the back of mandatory closure of non-essential industry in the country to prevent the spread of coronavirus, according to a report from Reuters Monday. The report said the three refineries process around 1,500 metric tons of gold a year, or about a third of total global annual supply.
Bullion services provider GoldCore, based in Dublin, said Monday that it has “experienced record demand in recent days and the global supply of gold and silver bullion coins and gold bars has quickly evaporated.”
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