Gold Prices Bounce Back - The Wild Ride Continues!

EDITOR NOTE: Gold’s price fluctuations may seem a bit “wild,” as the author describes, but only if you pay attention to daily volatility; the domain of short-term and intraday traders. On a larger scale, the run up from 2018 lows has been quite solid (not always smooth), with a sharp upturn after a March dip. Several analysts are forecasting gold prices to advance much higher. As an investor, you know of course that nothing goes up in a straight line without some pullback. Well, there it was, with more buying opportunities likely to come.

(Bloomberg) -- Gold rebounded Wednesday, extending a series of wild swings that saw the metal hit a record on Friday before plunging to below $1,900 an ounce.

After surging about 30% this year, gold’s rally came to a sudden halt as U.S. bond yields rose. Bullion had been one of the best-performing commodities in 2020, as the coronavirus outbreak pummeled the global economy, prompting central banks and governments to deploy massive stimulus. Its haven appeal was underpinned by a slide in U.S. Treasury real yields into negative territory.

Yet the sharp correction doesn’t signal the end of gold’s run, according to banks including Saxo Bank A/S, which said the sell-off has gone too far. DoubleLine Capital LP’s Jeffrey Gundlach said that he expects gold to keep trading higher despite the setback.

After dropping as much as 5.7% on Tuesday, the biggest one-day loss in seven years, spot gold sank as much as 2.6% to $1,863.15 an ounce. The metal then rebounded sharply, rising as much as 2% and was trading at $1,941.33 at 12:16 a.m. in London. Silver rose 4.6% higher.

Benchmark Treasury yields have climbed more than 10 basis points so far this month, amid improving risk appetite and an imminent flood of debt issuance. The recent rebound reflects investor hopes that the coronavirus will be contained, according to Standard Chartered Plc.

Once gold “got to $2,000 per ounce, in a lot of investors’ minds that could have been an opportunity to take profit,” said Gavin Wendt, senior resource analyst at MineLife Pty.

Gold’s still got plenty of high-profile supporters. Among banks that have forecast substantial gains in recent weeks, Bank of America Corp. predicted that prices will hit $3,000.

“Expectations of a V-shaped recovery from the coronavirus lockdowns remain far-fetched,” Avtar Sandu, senior manager for commodities at broker Phillip Futures in Singapore, said in a note. “The long-term fundamental drivers of gold remain positive in outlook. However, in the short run, gold prices seem to be reacting to headline news events and the technical picture has projected some consolidation ahead.”

Originally posted on Yahoo! Finance