The precious metal didn't just break its all-time high but smashed through a new one.
Gold has been going up since around mid-March when its prices crashed to about $1,465 in a coronavirus induced sell-off along with the stocks and bitcoin.
The uptrend in bullion prices took force ten days back when it was around $1,790 only to make its way to the ATH $1,920, last hit in September 2011 today to rally to a new peak of $1,944.
“After adjusting for volatility or downside volatility, gold is hands down the best performing asset of 2020,” said trader and economist Alex Kruger.
While bullion continues to gain, the US dollar has extended its slump as investors look ahead to a Federal Reserve decision amid a rise in coronavirus outbreaks globally, fresh cases emerged from China to Spain. Senate Majority Leader Mitch McConnell is also expected to release a $1 trillion pandemic relief proposal on Monday.
CORONAVIRUS PHASE 4 STIMULUS PACKAGE WILL BE INTRODUCED ON MONDAY: MNUCHIN#BreakingNews
— First Squawk (@FirstSquawk) July 26, 2020
The concern about the global economy and Fed’s open market committee meeting to reinforce a dovish outlook is driving precious metals and dollars in opposite directions.
“The July FOMC meeting should kick off a period from August into mid-September in which markets should price in an increasingly dovish, forward-looking Fed policy via lower real rates,” Morgan Stanley strategists wrote in a report. “This should benefit breakeven inflation rates, support risk assets, and weigh on the U.S. dollar.”
Rattled Investors by the latest US-China diplomatic feud is also driving yellow metal prices up while pushing stock prices down. Last week, the Trump administration told Beijing to close its consulate in Houston to which China responded with the closure of the US consulate in the southwestern city of Chengdu.
Weak stock prices “speak volumes of soured risk appetite amid escalating U.S.-China risks, worsening virus outbreaks, and a flagging recovery,” said Hayaki Narita of Mizuho Bank.
Gold All Time High ✅
Bitcoin is next ✴✴🚀🚀 https://t.co/Dq56xTGTXE
— Squeeze (@cryptoSqueeze) July 27, 2020
Gold hitting a new all-time high after nearly a decade “is certainly not a bad thing for BTC.” Bitcoin is setting up for a move that is likely to follow in gold’s footsteps.
The world’s leading digital currency is coiling into a multi-year triangle that doesn't “resolve with small moves,” but the same way with $15,000, then $24,000, says economist and trader Alex Kruger.
Bitcoin has already shattered its correlation with equities recently while shares catalyst with the precious metal in the form of pro-crypto Fed nominee Judy Shelton who wants to take the US back to the gold standard. This may even show up in daily correlations, said the trader.
From the beginning of the year…
Orange = Bitcoin
Yellow = Gold
Red = Nasdaq 100
Blue = S&P 500
Green = Dollar Index pic.twitter.com/YlA0ovdfdY
— Mati Greenspan (Tweets are not trading advice) (@MatiGreenspan) July 27, 2020
This week, things could get even more interesting with a focus on whether Congress will pass a new trillion-dollar economic stimulus (like the EU just approved a $2T stimulus). The US Federal Reserve will also be having its meeting this week. However, the market expects to keep rates unchanged, chairman Jerome Powell’s comments on the future direction of the economy will come under the spotlight.