Thursday's Market Minute: Gold Rush

Financial markets have been full of whipsaw moves in recent weeks, but Gold futures especially have stood out. The /GC contract plunged about 15% from the eight-year highs of 1704.3 on Mar. 9 before finding support near the 252-EMA around the 1450 level only a week later. The yellow metal rocketed right back in a V-shaped bounce that culminated with a massive +6.95% surge on Tuesday but stopped short of the crucial 1700 level.

As with many other things nowadays, the COVID-19 virus is behind the chaos. There’s a scramble for physical gold now as anxious people seek out the security of this ancient currency. But the coronavirus means gold operations are locking down across the globe, halting both production and transportation of bullion. In turn, this spells a shortage of gold that needs to be physically delivered to square expiring futures contracts.

This squeeze is even spurring the creation of a new CME futures product that (pending regulatory approval) would offer more flexible physical delivery in the form of various sizes of gold bars due to this extraordinary situation. Gold futures need to break the 1700 level for continued upside, and watch for a breakout below the yearly Linear Regression line near 1625 if the recent move fails to hold. Additional support may be found near the confluence of the 50-SMA and the 21-EMA near 1590.