The Week of April 20th, 2020

The following week was not too busy with different economic data. Nevertheless, the price of gold has had significant moves and will continue to move this week. On Tuesday, Economic Sentiment will be released by Germany and the European Union alongside Retail Sales from Canada. Secondly, on Wednesday, CPI of Great Brittan and Canada will be released. On Thursday, you can expect preliminary PMI data to be released from the European Union, Germany, France, Great Britain, and the USA. Finally, on Friday, analysts expect important data from Great Britain. This data includes Retail Sales, German IFO Business Climate, and the US Durable and Nondefense Capital Goods. 

Charts Analysis, Price of Gold, and Futures Contracts

Price of Gold Week 2 Futures Chart
Price of Gold Futures chart April 19 2020

The fundamental environment for gold is mixed. On one hand, the economic statistics from the previous week were a disappointment:

  • Poor data from Australian Business condition (negative 21 actual value) and confidence (negative -66 actual value) indices for March.
  • NY Empire State Manufacturing Index for April (negative 78.2 actual data).
  • Some March American data were even below their minimum in 2008, e.x. Retail Sales actual data a negative 8.7% and Industrial Production with a negative 5.4% MoM changes.
  • Finally, Initial Jobless Claims released below consensus expectation with 5245 thousand people applied. 

On the other hand, after the report of Gilead on Thursday announcing their drug shows effective treatment results, this suggests the significant risk-off. 

The price of gold bounced from level 1800 earlier on the previous week and then dropped down to 1700 dollars per troy ounce. Investors, expect the price of gold to dip lower and bounce up from one of the support levels at 1672 from the previously formed triple top. Or the price of gold can bounce up from the support and resistance formed in the 2011-2012 period at values 1640 or 1564. However, volatility within the prices should drop, and May futures contracts will expire in 8 days. Using these facts, the best strategy might be selling strangle. This means you might want to sell May call option with strike 1800 and sell May put option with strike 1600.

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Disclaimer. This article is not meant to serve as professional economic advice. Any action you take upon the information from this article and website is strictly at your own risk.

One Comment

  1. coronavirus crisis is pushing the gold prices up as this is the safe way to invest but the threat of delivery causes the spread to persist. I think logistic opportunities in the future can prevent the spread to close.

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