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Are Gold Stocks Resetting?

Gold stocks have seen better days. With a lot going on in the world right now, it is affecting gold prices and more. A senior researcher at FXTM, Lukman Otunuga said, “Gold collapsed like a house of cards on Wednesday…as investors overlooked civil unrest in the United States and heavily focused on hopes around central bank intervention and economic recovery.” 

Gold prices were expected to drop, but actually much lower than they did on June 3rd. You see, the ADP jobs report was released for May but was way better than expected. Analysts estimated it would report job losses at around 9 million. The actual report showed that number was actually 2.7 million. This has caused the gold price to go down to $1697. It was previously around $1741 before the report.

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Phil Flynn, senior market analyst at Price Futures Group stated, “It’s really a story of economic optimism and strength in the stock market,” “The ADP jobs report came out a lot better than expected, and the stock market is on a tear….Some of the worst-case fears about the economy continuing to contract have gone away.”

What Else Is Affecting The Gold Price?

Another thing possibly affecting gold prices and gold stocks is exchange-traded fund-related buying. This is due to a lack of demand for gold from Asia because of the coronavirus pandemic that has taken over the world. Carsten Fritsch, an analyst at Commerzbank said, “Though gold ETFs still registered inflows yesterday, these were much lower than in the days before. Gold is reliant on high ETF inflows to offset the acute demand weakness in Asia.”

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Currently there is a negative net gold imports from Hong Kong. In addition to this, imports from Switzerland dropped to nothing in April which had an effect too. The possibility remains for China to have lots of surplus gold that there is no demand for, driving the price of gold even lower.

But will gold be making a comeback? In general, ETF holdings are still strong right now. The expectation for inflation exists right now though. TD Securities said in a statement “improving inflation expectations and mass amounts of monetary and fiscal support, suggest investors will have reason to return to the yellow metal.”

March Compared To Now

In March of 2020, the price of gold went under $1500 after reaching $1700 during a big spike. Gold refineries shut down in Switzerland, and flights were being canceled due to the pandemic. Many companies had no choice but to delay the transport of gold. Gold refining was also delayed affecting the overall logistics canceled by Covid-19.

This caused banks to pull back on gold as the aftermath. It was reported that HSBC lost $200m in one day alone. Scotiabank announced that it left the gold market and even set aside $168 million to handle closing its operations.

With the price of gold being back near $1700 it means that things have begun to recover. $1700 is the number it was previously at before it took a big dive due to coronavirus related problems. The gold price rose because of the jobless benefits rising instead of falling as they were expected to.

As things begin to turn back to normal in the world, will we see a rise in the price of gold? The future is unclear right now but keep an eye on the gold market and the things that affect its price to see where things go.

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