World focus will be on US jobs tomorrow. Everyone is looking at US March non-farm payroll numbers. I will not be closely watching NFP. I will prefer to trade in the technical. Global markets are closed tomorrow. Gold and silver futures are closed worldwide tomorrow. Impact of gold and silver will be felt on Monday in the future. Spot gold and spot silver will be impacted on Friday.
There should be a big divergence between today’s close and Monday’s open. London markets are closed on Monday due to Easter Monday. Second quarter position squaring and rebuilding will continue till Tuesday (6th April).
Factors which will affect gold and silver prices in second quarter (short view)
Bond Yields: Rising US bond yields is the sole reason for sell off in gold and silver price in the first quarter. A slower pace of rise on bond yields will be bullish for gold and silver.
US dollar Index: US dollar Index will pare its first quarter gains if Eurozone recovers from covid crisis earlier than expected. Right now the US dollar Index is technically bullish.
Pace of covid vaccinations in USA, UK, Eurozone and most nations: Covid vaccinations will be at a much greater pace in Q2 than Q1. Children below eighteen years are expected to get the vaccine. The Eurozone is lagging way behind the USA and UK as far as covid vaccinations are concerned. Gold price will be affected only if covid vaccination zooms worldwide. Gold prices have fallen in Q1 partly due to expectation that covid vaccination will result in return to near normalcy.
Inflation and stagflation: Central banks are ignoring inflation. They consider inflation as a non-recurring event. Lower base price (due to covid lockdown last year) will increase headline inflation this year. In my view central banks are just playing safe as covid crisis is not yet over. Uncertainty is there. The degree of uncertainty has reduced. Long term interest rates have risen on hyperinflation concerns. Gold price will form a long term bottom this quarter (if it continues to fall). Thereafter hyperinflation concerns will result in another big rise. High post pandemic growth + hyperinflation = higher gold price.
Gold and crypto currencies will support each other: At the end of the day gold and crypto currencies are an alternative to fiat currencies. The only difference is crypto currencies are the newest digital investment fad in town. Bitcoin and crypto currencies can triple in the next twelve months (accompanied by higher risk) while gold will continue to be a safe haven.
Economic growth and jobs creation: Post pandemic growth expectation is driving all asset classes higher (except gold price). Covid vaccine à return to normalcy à higher jobs creation in travel, tourism and other service industries affected by restrictions on global travel. à Asset bubbles are getting formed in selected stock sectors à Gold will restart its bullish run when this asset bubble burst.
Biden infrastructure plan will result in historical job creation: History says that proposed major US policy change takes a lot of time to be passed in the American parliament. Job creation in the USA will be at a historical high if and when the Biden infrastructure plan is passed and starts getting implemented. Jobs creation in the infrastructure sector moves at the pace of a turtle. In this short term this plan will have a zero impact on job creation. In the long term there will be a massive impact.
Copper, nickel and steel prices will remain firm and/rise on expectation on even higher long term demand caused by Biden’s proposed American infrastructure plan. It is a buy on crashes strategy in copper, steel and nickel for the rest of the year.
Spot gold: April Month View: (i) Key support: $1610.10, $1666.10 (ii) Key resistances: $1749.10, $1790.50 and $1848.80. (iii) Immediate resistance: $1721.40. (iv) Gold has to trade over $1666.10 in April to rise to $1790.50 and $1848.80. (v) Gold will crash if it does not break $1749.10 by 15th April to $1610.10 and $1566.10. (vi) Gold has to trade over $1749.10 for at least four consecutive days for any chance to test $1900.