Gold is trading around $1490 in Asian session
The gold price is relative stable since market opening. Before the European session, gold was ranging around $1490. Investors in the market are still very worried about the impact of the global pandemic on the economy, however, there is no further desire for “cash”.
Liquidity issue would be the one of the negative factors in gold market. Earlier, the Federal Reserve operated dollar swap with nine central banks: Australia, Brazil, Denmark, South Korea, Mexico, Norway, New Zealand, Singapore, and Sweden, with quotas of up to $ 60 billion each. For the other major central banks, including the Bank of Canada, the Bank of England, the Bank of Japan, the European Central Bank and the Swiss National Bank, the Federal Reserve announced an increase in dollar swap quotas to further inject liquidity in the market.
As the global pandemic is getting more and more severe, some investors have reallocated their portfolio to buy back gold. As liquidity problems ease, some gold market participants do not need to liquidize gold to “cash out”, which supporting the gold price.
ZFX analyst Jacob Leung said that speculative net longs are still huge, more than 280,000 contracts net longs in gold future, which means that the potential selling pressure could be considerable. The outlook of gold would not be so optimistic.