Economic expansion:

Generally a rising income is often associated with higher demand for jewellery and technology. But with the actual situation, and the propagation of COVID-19, global world output growth is forecasted to decrease sharply in second quarter of 2020.  Which may weigh on gold demand for jewellery and technology.

 Risk & Uncertainty:

Against this, an increasing risky situation in financial markets pushes investors toward cash and gold as a safe haven, in order to be protected from the sharp fluctuations in the market and the uncertain outlook of the economy.

Among those risk measures we can site the U.S corporate bond yield spread which increased in April 10th to 1.88, the sharpest increase since the previous financial crisis.

corporate bond yield spread

Another risk measure is the vix, which decreased from its march highs and ending the week at 35.9 which is still considered highly volatile. Even though, the significant decline in the VIX is due to the fed intervention to keep printing money and purchasing risky assets.

As long as risk exists, the demand for gold is expected to continue for the sake of safety.


Over 40 central bankers have rushed to ease the monetary conditions to combat the medical crises the world is facing.

Money supply in the United States is strongly higher as the FED responded quickly to the need in cash, to support the economy. However, the inflationary effect made by over printing money is unlikely to be seen until the second half of the year when the economy reopens again.

Those inflationary concerns are also to support GOLD prices in the rest of the year.

United States Money Supply

Opportunity cost:

The perceived relative value of competing assets including bonds (interest rates) and currencies influence investor attitudes towards gold.

 As we see in the chart below U.S bonds are getting more and more expansive as an asset class compared to gold. Real interest rates are negative along with the 10-year treasury inflation-indexed bond yield.

U.S real interest rate


Futures traders open interest % change is still relatively high at 29.6% , which is a signal that risk is still present in the market and investors are seeking more and more security in gold.

 Gold prices have soared over the last several months, with the metal up 13.74% year-to-date compared with a 12% decline in the S&P 500. 

In a year over year period, Gold Fixing Price in London Bullion Market increased enormously by 35,4% from April of the previous year.

Demand for gold is the highest it’s been since 2013, but gold suppliers are struggling to process orders. And Supply chain difficulties have seriously stalled global gold production, and prices continue to be out of sync globally.

Gold prices are rising because investors see the metal as a safe haven against global uncertainty and a hedge against inflation — especially with the Federal Reserve undertaking unprecedented levels of stimulus to combat the coronavirus pandemic.

Our view on gold is to keep its upward move for the second quarter 2020 as a safe haven against risk of economic slowdown, and to continue rising over the third quarter as a hedge against inflationary pressures.

We expect that the U.S and global economy are still away from recovery, so the fed and other central banks around the world can neither rise interest rates nor reduce their balance sheet if the economy did not recover yet.

This will lead us into a second half of 2020 with high inflation and low growth, which is a good environment for gold to soar to new levels high .