Gold May Soon Drive Short Covering Rally

Gold was last at $2,042 an ounce, having advanced by 2.1% on Tuesday, or close to 1.5%, and 0.15% so far on Wednesday, April 5, to a 2020 record high of $2,069.40. Comex gold for June delivery +2% to $2,039.50/oz, the highest intraday price so far this year, while June silver +4.2% to $25.15/oz and July platinum on Nymex +3.2% to $1,034.80/oz. The bullion has gained 12% in the past month alone and is up 25% from its recent low in November!

The price of gold is usually determined by three factors. An ounce of gold is worth more dollars when the dollar is devalued. Lower bond yields mean less competition for non-yielding gold. Greater risk aversion has made the shiny metal more popular as civilization's oldest store of value.

Gold is also benefitting from the aggravating marked of bonds, additionally unnerved by the ongoing banking crisis. Thus, March bond yields plummeted – UST 2-year yield was around 3.85% on Wednesday, down from a peak of 5.1% early last month. Meanwhile, overseas bond yields have fared much better, weighing on the dollar. If gold manages to retain the above-$2,000 levels for another week, it could cause a big short covering rally.