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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