Gold is increasingly recognized as a mainstream investment

Review & Trends

Traders are enjoying a long 4th July holiday weekend as the U.S. stock, bond and commodity markets, including the NYSE and NASDAQ, were closed on Friday in observance of Independence Day. U.S. commodities markets, including gold and oil futures, as well as the bond market also were closed for trading Friday.

Meanwhile today’s futures of the S&P 500 and Dow Jones Industrial are down by less than a half percent, after the indexes continued advancing on Thursday in the wake of a stronger-than-expected U.S. jobs report.

However, according to the U.S. Congressional Budget Office's 10-year forecast published last week, America's recovery from the pandemic crisis may last through the better part of the next decade.

We are gradually approaching the First Half 2020 earnings reporting season. It’s safe to say investors were in a forgiving mood back in the previous quarter. With stocks up 25% since their March minimums, the time for patience has passed. Stocks are coming off their best quarter in 22 years, with valuations by some measures the most expensive in two decades.

It is assumed, that companies had enough time to devise plans for a world reordered by the coronavirus. But according to some big investment banks, investors are going to demand a little bit more clarity this time around -- because they just want to know whether these elevated numbers are justified.

I personally think that divergence between companies that adapted to new reality and those that are still waiting – will be widening. What will be particularly under radar is amount of online – rather than brick-and-mortar – business activity. For this reason, we expect good results from some food and staples retailers as opposed to inhouse restaurants, and streaming home video services as opposed to cinemas, etc.

 

Instrument

According to World Gold Council, global gold central bank net purchases totaled 39.8 metric tons in May, in line with net purchases in March and April, and above the monthly average of 35 tons over the first four months of this year.

Gold is increasingly recognized as a mainstream investment as global investment demand has grown by an average of 14% per year since 2001 and the gold price has increased 550% over the same period. Saxo Bank wrote in its market note that gold will ‘reward the patient investor’ this quarter, seeing record high on the horizon. Spot gold futures traded at $1,772 per ounce on Thursday, up around 0.2% for the session. The main precious metal briefly touched $1,807 per troy ounce on Wednesday, reaching its highest intraday level since September 2011 when it traded at $1,819 per ounce.