Gold continued to gain ground on Wednesday, setting new highs for the year. The yellow metal has now reached levels last seen in March 2013 amid ongoing coronavirus concerns.

Recent gains in gold come despite a near-three-year highs in the dollar index and record-high closes in the S&P 500 and NASDAQ. Gold rallying in tandem with stocks and the dollar highlights mounting expectations for further monetary and fiscal accommodations to support the global economy.

Adidas reported today that sales in China are off a whopping 85% as a result of the coronavirus, versus the same period last year. Imagine the impact on the world economy if these results are being replicated across multiple brands. It has the potential to be a dismal Q1.

Citi believes that coronavirus associated market jitters will continue to inspire safe-haven buying of gold. They see upside potential to $2,000 in the next 12 to 24 months.

“Gold should perform as a convex macro asset market hedge, resilient during ongoing risk market rallies but a better hedge during sell-offs and vol spikes.” – Citi analysts led by Ed Morse

The metals garnered some additional support from hotter than expected PPI. The January headline PPI print was +0.5%, on expectations of +0.1%. The annualized rate of inflation at the producer level jumped to 2.1%, versus 1.3% in December.

Core PPI also rose 0.5%, on expectation of +0.1%. Annualized core PPI came in at 1.7%, up from 1.1% y/y in December.

Silver gained another 1.5% on Wednesday, moving within 50¢ of the 18.86 peak from January. It was the fifth consecutive higher daily close.

The gold/silver ratio fell for a fifth consecutive session. As a general rule, I like when silver leads gold on rallies, so price action this week has been encouraging.

An eventual new high for the year above 18.86 would bode well for a more a challenge of the more important cycle high from last September at 19.65.

Palladium surged to another record high at 2842.50, before coming under intraday pressure. At one point during Wednesday's session, palladium was $199 (7%) off that high. However, by the close, more than 50% of the intraday decline had already been retraced.

Platinum regained and closed above the $1,000. More than 61.8% of the recent correction has now been retraced, lending credence to the scenario that calls for a retest of the January high at 1041.45.

Rhodium set a fresh record high of $12,550, based on the Johnson Matthey New York Base Price.


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