April Gold 2020 and economy

The coming week has several high impact events that will affect gold prices. Today, April 15 (Wed), data for US Retail Sales for March will be released. The Bank of Canada will give its Monetary Policy report and Interest Rate decision. Also, employment statistics for March will be reported by Australia. On April 16 (Thu), GDP for China will be released. The analyst consensus is negative 6% for year-over-year change and negative 10% for quarter-over-quarter change for the first quarter of 2020.

Gold Chart Analysis

Gold chart 2011 to 2020

Taking a look into a weekly chart of gold prices, we can see the ongoing tendency is extremely fast. The breakout from the green channel has been tested twice. First, in the middle of November 2019, and then tested a second time a month ago in the middle of March 2020 from the bounce-point with the $1450 price. This implies a continuous upward movement for gold. However, the pattern of price development suggests that after the current soar of about 20%, we should expect a retracement of about 6% to levels $1620-1645. Also, there is a strong resistance level at $1800, near the all-time-high. This probably will not be broken easily during the next week.

the year for Gold Prices

gold prices 4 hour chart

Coming down to this four-hour chart, let’s take a look at a previous price movement. Gold rallied from June until September 2019 and set the breakout of the upward channel at $1560 (*1* on the graph). The Fibonacci retracement level 38% was tested in the middle of November at $1450, setting a new support level for gold (*2*). After this, the price returned to $1570 (*3*) and continued to rise. This level was tested during the third week of March 2020. So, we can see the huge volatility in March was caused by three major factors. First, the equity panic sell-off. Second, the Federal Reserve slashing rates almost to zero. Finally, the Fed also introduced a relief plan over COVID-19. Toward the end of the trading week, the price formed the bulling pattern known as ‘inverse head-and-shoulders’ (*4*). This suggests an additional ~140 points of rising.

To sum up, traders seek safe-haven assets in gold. Therefore, it is more likely that we will see rising gold prices at the beginning of next week. However, we might expect some significant drops later due to taking profits to maintain normal price developments.

Gold and Silver Ratio

gold to silver ratio 2007 to 2020

During the COVID-19 global crisis, silver prices remain relatively flat. Despite this, the gold-to-silver ratio has soared since the third quarter of 2019, bouncing from the November 2008 peak (*1*). We saw the breakout (*2*) from the upward channel during Black Monday for equities on March 16. Now, this breakout has been tested at level ~108. But, this ration might go even higher. This is because of the instability of the global economy and the recent update of Bloomberg Economics identifying a 100% probability of an incoming economic recession. Overall, this supports the expectation of gold prices to continue in an upward trend with silver prices to stagnate in the nearest future.


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