The gold price marched towards its highest level since December 2012 this morning, trading at $1,720.

A surge in gold prices alongside falling US futures over the Easter break suggest that risk sentiment is turning towards the cautious side, and investors are fleeing into the perceived safe-haven in view of the virus situation and massive money-printing activities.

Technically, the gold price has broken out of its previous high at $1,700 and moved decisively higher. The Fibonacci extension suggests the next resistance could be found at $1,757 (100% extension), and then $1,808 (127.2% extension).

US futures are little moved on Tuesday morning, after falling over 1% on Monday. This may give little direction to Asian trading today. However, the release of China’s trade balance data might be in focus, as traders digest this key figure for clues of the global trade environment in a time of extreme consumer contraction and uncertainty. After exports contracted over 17% year-on-year in the previous month, analysts now expect this trend to carry on. Consensus estimates suggest Chinese exports have shrunk by 14% year-on-year in March.

A worse-than-expected reading is possible, after major European countries and the US-implemented lockdown and social distancing measures in March, which are likely to have a severe negative impact on trade. The AUD, CNH, China A50 index and Hang Seng index are all sensitive to China data.

Crude oil prices let go earlier gains and move decisively into negative territory yesterday, despite OPEC+ and Russia striking a deal to slash output by nearly 10 million bpd. The demand outlook is a clear drag, as a 10 million bpd cut is insufficient to offset the 20+ million bpd drop in global demand.

The next catalyst for oil might be the gradual resumption of business activities in parts of EU and then the US. However, it might take a long time to restore full capacity, and consumers might be reluctant to go outside before an effective medicine or vaccine is developed. For now, WTI is likely to consolidate between a range of $20.0 and 25.9.

Gold – Cash (monthly)

China exports (year-on-year)

 

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