(ATF) Gold is up 17% since reaching a low of $1,471 on March 19, one of the darkest days for equities and almost everything else in the ongoing coronavirus crisis.
Both end-of-the-world hedgers and investors plagued by inflation phobia as central banks print huge loads of money are buying the barbaric relic. The betting here is that the gold buying spree will continue until there is more visibility on when major economies emerge from lockdown – a date, by best estimates, at least a month away.
As gold rises, the almighty US dollar is approaching its late March lows and trading at 99.1020 (DXY) at 8pm HK time. With the Fed printing machines running red-hot, the days of stressful dollar shortage and dollar highs are past. The world economy has all sorts of problems; but for now, dollar liquidity is not among them. So look for more dollar softness as gold and equities rise.
The Chinese yuan is shrugging off both dollar weakness and gold strength. The PBoC set central parity at 7.0406 on Tuesday morning, a bit weaker than Monday’s 7.0300. But there was little action in the course of the day, with CNY currently (8pm) at 7.0550.
Somewhat better than expected China trade numbers for March made little impact one way or another, as too many unknowns allow for no solution when it comes to figuring out the China economy.
What is clear is that the PBoC has no difficulty keeping the yuan in its comfort zone of 7.05 to 7.10.