(Kitco News) Markets are ignoring the negative backward-looking data and are instead focusing on what’s to come — economies eventually reopening. For gold, this means continued risk-on pressure next week, according to analysts.
“Sentiment is a bigger driver than macro fundamentals. It’s definitely true that the macro outlook is especially favorable to gold right now. But I don’t think that’s going to be on everyone’s radar until we’re in the recovery phase,” Gainesville Coins precious metals expert Everett Millman told Kitco News Friday.
Some optimism in the marketplace has reawakened investors, shaving off more than $80 of gold’s 7.5-year high at above $1,780 an ounce hit earlier this week. In the meantime, U.S. equities are doing well with the Dow last up nearly 500 points on the day.
“There’s an element of profit-taking here. We did hit some technical levels that persuaded some people to get out. The other thing was risk appetite. There are those who strictly think that gold is a function of the equity market and if equity markets do well then gold should do badly … We see a bit of a negative correlation between equities and gold come back,” said TD Securities head of global strategy Bart Melek. “We’ve also continued to have a very robust U.S. dollar.”
The risk-on sentiment, which is weighing on gold, comes amid reports that Gilead Sciences drug has demonstrated some effectiveness in treating the coronavirus, which is giving investors hope that the U.S. economy could reopen sooner than expected.
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