Gold prices closed the month of April in the most volatile fashion you could think of. But the yellow metal maintained its final day of April in the green; still above its previous $1,650 level of support. This was much lower than where it traded earlier in the session ($1737). However, gold prices still posted their best monthly gain since August.
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Growing physical demand for gold boosted prices this month and more expectations of fiscal stimulus kept investors’ interest. The next key focus for gold investors will be on financials. A stabilizing interest rate and the expectation of inflation are in the spotlight heading into May. Assuming that the economy gets back to work – no matter what that looks like – will truly test the metal of all fiscal policies put in place over the last 60 days.
U.S. inflation pressures also decreased in March. Personal consumption expenditure price gauge dropped 0.3% led by energy prices. The latest Fed policy eventually gave metals a boost this week. It will be a trend monitored into the new month.
“Two key factors to follow are interest rates and inflation expectations as they are the inputs for the equation to calculate real interest rates and ultimately, real interest rates have a major impact on gold’s appeal as a safe haven asset.”Tyler Richey, Sevens Report Research
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In a podcast published on Forbes magazine last Friday, Steve Forbes, chairman and editor-in-chief of Forbes Media, outlined several economic scenarios. Most pointed to tailwinds for the yellow metal.
“The trillions of dollars being spent to save our virus-battered economy are stoking fears of inflation,” he said. “Gold has always been a hedge against government’s economic blunders.”
Keep in mind that earlier this month, Bank of America was among the Wall Street analysts who have turned bullish on gold. They are calling for prices to target $3,000 in 18 months. The moves for gold prices also come as the World Gold Council said investment demand for bullion soared in the first quarter. This came as the COVID-19 pandemic fueled the safe-haven appetite for the precious metal. Then again, the long-term outlook for the price of gold will also depend on who sits in the Oval Office come November. Forbes also agrees with the same notion.
“If we get a government next year that is committed to reducing taxes and removing burdens on businesses, especially small businesses, by golly stocks will really come roaring back. If not, then you’ll be glad you bought some gold as a hedge,” he said.
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