Originally published on February 4, 2020 by TraderStef at CrushTheStreet.
Goldman Sachs predicts the coronavirus outbreak will shave 2% off global GDP growth in 1Q20, and that is after the IMF cut its growth forecast at the World Economic Forum in Davos before coronavirus headlines jammed the economic radar. An article published yesterday, provides a good overview along with charts on why China’s impact on the global economy will be more aggressive than the 2002-2003 SARS epidemic numbers that are already left in the dust. Global central banks are holding their breath and keeping interest rates steady until economic fallout is obvious, and that would eviscerate any sanguine outlook that stable financial conditions are taking hold ten years after the Great Financial Crisis.
Financial media pundits have already begun to suggest that the Fed will have to cut interest rates at some point in 2020 due to the coronavirus..
“Newsflash: central banks can’t cure diseases, solve climate change, or address structural challenges. In fact, they cannot do any of that. So stop pretending that they save anything. All they can do is mask the problems and create the illusion of control.” – NorthmanTrader, Feb. 3
A Fed rate cut in 2020 is now on the table as coronavirus spreads – Benn Steil at the Council on Foreign Relations on CNBC Trading Nation, Feb. 5
“Coronavirus 2019nCov Cases In China Jump to 52,720 – 28,018 Confirmed 24,702 Suspect 3,859 severe cases 1153 cases were cured and discharged (aka resolved cases), 563 dead” – Dr. Henry Niman PhD., 10:45 pm on Feb 5
Let us move on to some data points and a few thoughts on today’s gold chart. To view a larger version of any chart, right-click on it and choose your “view image” option.
“Imports of materials like plastics and crude petroleum intended for the manufacturing sector, which has been in recession for months, fell by 9.3%.” – AFP, Feb. 5
$TNX 10-year note interest rate (at 1.64%) weekly chart as of Feb. 5, 5 pm EST…
700 years of interest rates courtesy of Visual Capitalist…
Central banks’ gold net purchases from 2000-2019…
“London Precious Metals Vault Holdings… “As of October 2019, there were 8,264 tones of gold, valued at $401.5 billion and 35,876 tones of silver valued at $20.8 billion. This equates to approximately 661,149 gold bars and 1,195,853 silver bars. This represents a record high (since the data was first published) for gold in both volume and value terms and a record high for silver in value terms. We reported that recently that the ratio of holdings held at the Bank of England against those held in commercial vaults had fallen over the period since the data was first published (see final chart in the full Press Release).” – LBMA, Feb. 3, 2020
An article appeared in the South China Morning Post on Jan. 29 quoting Hong Kong-based Standard Chartered calling for $1,800 per ounce gold in 2020 as the coronavirus fallout infects the global economy.
Gold, only safe haven in town amid coronavirus outbreak, expected hit record high this year… “Gold rose 4.8% in January to hit a seven-year high on Friday, as investors sought out the safe-haven asset amid the coronavirus outbreak, a trend that will support its price this year, analysts said. Even after a retreat this week, it was up 4% year to date on Wednesday… Demand for gold tends to drop after the Lunar New Year holiday as seasonal demand fades, but this year, a different picture is emerging, Suki Cooper, precious metals analyst at Standard Chartered bank’s New York branch, said in a recent research report. ‘Buying tends to ease once the Lunar New Year holiday commences. However, this year prices have remained elevated, with gold benefiting alongside other safe-haven assets amid coronavirus fears,’ she said. ‘While we do not believe overall investor positioning is overcrowded in gold… We continue to see sustained upside risk to gold prices in the second half of 2020.’”
Thanks to GoldMinerPulse for bringing to my attention the Feb 5, Shanghai Gold Exchange (SGE) daily gold settlement volume (Au(T+D) plus mAu(T+D) at 2.8 tonnes is at the lowest level seen since July 2013. I suspect that despite any modern capability of remote work, the economic slowdown hitting China is taking a toll on all industries. Here is an image the SGE proudly displays on their Website showing employees at work despite Shanghai and other major population centers being transformed into ghost towns due to the coronavirus.
Gold futures 20-year seasonality as of Dec. 2019…
Gold daily chart as of Feb. 5, 5pm EST…
Gold is performing well in USD by conserving capital as a safe haven while the U.S. stock market experiences extreme volatility and precarious events are unfolding around the world.
Today’s daily chart highlights a V-Top or potential V-Top Extended pattern since the Plunger Candle (aka Shooting Star) printed on Jan. 7 at the $1,611 high. It was only a couple of days prior to the coronavirus creeping into mainstream media headlines that I appeared on Dr. Dave Janda’s Operation Freedom live radio broadcast and suggested that there would be additional chops in gold’s price action before $1,611 is revisited. The $1,586 Fibonacci level has turned out to be a substantial resistance area. From a big picture point of view, it appears that a Measured Move Up is taking shape that originates from the May 2019 low.
You can read my most recent in-depth technical analysis on gold, silver, and the U.S. stock market at the following links:
Here are a few articles to consider and an interview before closing up shop tonight:
Gold Demand Trends Full year and Q4 2019 – World Gold Council
Beware of Fake Feds Selling Fake Gold! – The Daily Coin
How Effective Is Gold As a Hedge? History Has an Empirical Answer – GoldSilver
February 2020 Gold Chronicles with Jim Rickards and Alex Stanczyk – Feb. 5
Plan Your Trade, Trade Your Plan
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