This Week Highlight - Gold Forecast in April

 


This Week Highlight - Gold Forecast in April
Less than a week after President Biden pushed out the USD1.9 Trillion stimulus, his administration is already looking to plan another fresh USD3 Trillion aid package to support the infrastructure and domestic needs. Nevertheless, Dow Jones has topped off its recent fresh high at above 33,000 level and begins to fall instead!

The bear sentiment in stock market is due to the rising Bond yields. Despite more monies will be printed and Dollar will eventually be weakened, the fear of stoking inflation is already building up in the market. Ironically, will there be real inflation in U.S. economy when it is so badly dented by the pandemic crisis? Personally, I think this is a ridiculous reason to believe in the white lie.

Last year, Federal Reserve increased the leverage in all American banks in holding Treasury Bonds during the impact of pandemic crisis. This is to prevent the tumble of Bond prices and keep the interest rate at low level to facilitate liquidity in markets. After the recent roll out of USD1.9 Trillion stimulus, FED chair Powell has announced the capital ratio of all American onshore banks will be shaved after March since cash has been injected into the market for supporting the equity prices. Hence, investors foresee the banks will begin to sell off Treasury Bonds on hand than to increase capital to hold them.

If Bonds fall and yields rise, stock prices will encounter selling pressure too. Thus, we foresee there will be high volatility in April due to much adjustment of positions in large-cap shares. In theory, when market interest rises with mild-firm Dollar on temporary sentiment, we are likely to see falling blue-chips. The remaining instruments will be the counterbalance of Gold and Crude prices.

Since we are not going to expect a sharp rise in Dollar Index (USDX) above 94.00 level, that means the Gold and WTI Crude will probably weigh out among themselves by trading inversely. When we look at the two instruments now, the WTI Crude seems to be resilient at above USD60 /barrel since OPEC is not pushing for more production cut. In case the WTI Crude begins to fall, that should trigger the yellow metal to appreciate.

In April, we expect the Gold prices will trade from USD1700 - USD1760 /oz. Once the bulls pierce above USD1760 /oz, be prepared to see a new buying demand surges in market and it might re-visit above USD1850 /oz as our next target.

Gold prices are a good safe haven for seeking inflation or balancing weak Dollar. Making a plan to spread some investment in the precious metal will be fruitful in Q2 seasons. When fund flights out of stock and Crude, it's time to shop for Gold investment.



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