US, WASHINGTON (ORDO NEWS) — Despite the unprecedented phenomenon that recently forced investors to sell Gold to cover margin calls following the catastrophic fall in stocks, the current turmoil in the economic and financial markets caused by the coronavirus is in theory the perfect environment for gold.
It is that once again highlights the famous bank Goldman Sachs (NYSE: GS ) in an analysis note published yesterday, in which it evokes a target at $ 1,800 an ounce for the yellow metal.
“We have long argued that gold is the currency of last resort, acting as a cover against currency depreciation when policy makers act to cope with shocks such as the one we are currently experiencing,” analysts said. Goldman Sachs led by Jeffrey Currie.
Goldman analysts, with a 12-month price target of $ 1,800 an ounce, said that would change, thanks to the Federal Reserve’s aggressive plan to buy bonds released on Monday, in which the US central bank said it would buy as many treasury bills and mortgage-backed securities as needed to keep the financial markets running smoothly.
Goldman analysts said that gold has been weighed down by a world that needs dollars, which requires forced sales of liquid assets like gold. Falling oil prices, with Saudi Arabia and Russia failing to agree on production cuts, also created dollar shortages for emerging market economies, which may have done from Russia a net seller of gold, according to Goldman.
Goldman analysts also recalled that in 2008, the announcement of quantitative easing in November marked a turning point.
“We are starting to see a similar trend taking shape with the stabilization of the price of gold over the past week and its recovery [Monday] when the Fed introduced new liquidity injection facilities with the announcement of this morning, “they said.
Analysts who have said that with the easing of Fed funding constraints, attention will likely focus on the large expansion of the Fed’s balance sheet, the increase in developed market fiscal deficits and concerns about sustainability of the European monetary union.
“We believe this will likely lead to depreciation concerns similar to those in the aftermath of the global financial crisis,” they said.
Gold could therefore continue to rise, after having already shown a strong increase yesterday.
The yellow metal indeed marked a peak at $ 1636 last night, and then corrected until testing $ 1600, but this psychological threshold is now displayed as a support for several hours, and this slight decline since the last peaks could constitute a good buyer entry point, knowing that a further correction towards $ 1575 is not excluded, and would not call into question the positive substantive bias.
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