Why Gold Prices Are About To Skyrocket Even Higher

As we are publishing this report, gold is trading at $1614 per ounce, while the white metal is hovering around $14.50. We’ve never seen anything like this. You could say the world has never seen anything like what’s happening right now. Coronavirus is continuously sending shockwaves around the financial world. We have already seen the Dow Jones and the S&P 500 suffering the deepest quarterly drop since the Great Depression, exacerbated by a 60% oil price slump. The major central banks around the world have reduced interest rates and G20 countries are now injecting a staggering $5 trillion into the global economy. The governments understand that the implication of the lockdown would send the economy into a recession, but In order to fight the virus and save people’s lives they are helpless and this is the only option they have.

The deadly virus is continued to spread at a very high level, especially in the United States and Europe. Total cases have reached 882,106, with deaths having reached 44,136. We believe the implications of the pandemic on the global economy would be very severe.

Chinese factories and cities are reopening and China got some positive economic data, which was surprising for sure. The second-largest economy’s manufacturing purchasing managers index (PMI) for March was 52.0 compared with 35.7 in February, while the services PMI was 52.3 in March versus 29.6 in February. One recent study which is very alarming suggests that lifting lockdown measures in Wuhan too soon could see China experience the second peak of cases later in 2020.

Implications on Gold and Silver

We believe the major collapse within equities is under development and until unless we don’t find a vaccine, we shouldn’t hope for a major trend reversal in U.S. major stock indices. Health-care experts are predicting 12 to 18 months’ time in order to develop a vaccine against the virus. Gold could consolidate in the near term, but the long-term picture is strongly bullish. The yellow metal has made a recent top around the $1,691 area, however, we don’t see gold stopping here. Gold could test $1840-$1850 zone. We believe any price drop in gold near the $1530-$1550 could be a bargain to enter long.

In our several recent reports, we tried to Inform you regarding the opportunity to enter long in silver. The weakness in silver dragged the gold-silver ratio to its all-time high, level of 125, which represents the amount of silver required to buy one ounce of gold. At the moment, silver prices should be at $25 per ounce under the average gold-silver ratio of the last 20 years. We wouldn’t recommend you to enter long at the moment on silver. However, if prices drop to around $10, which we are still hoping for, this could be the greatest opportunity to make enormous profit from the silver position.

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Summary

The global emergency rate cut, rapidly growing cases of COVID-19, country-wide lockdowns, a continuous falling U.S. bond yield and DXY, rising tension in U.S.-China trade talks, the significant drop in U.S. major stock indices along with other major countries indices and fear of a severe global economic depression all are supporting safe-haven buying at the moment. The global economic impact of COVID-19 could be much more significant than most analyst thinks. Until we don’t have the cure of this deadly virus, the selling in global financial markets will not end, which will support the safe-haven bid. The implications of the pandemic on the global economy will be very severe. The long-term picture of the gold and silver market is strongly bullish. 

Written By: Neeraj Pandey