As most of you probably have already noticed, the restrictions which help us prevent the spreading of COVID-19 have a powerful impact on the financial market and on the overall economy. We recommend traders to be prepared in this time of high volatility and market movements that can be labeled as uncertain. This can be generated by central banks’ attempts to secure the current situation.
Ongoing extreme spreads on gold, lack of opening new positions
The main reason behind the ongoing growth in gold prices is based on the fact that gold has the ability to act as a “save haven” when it comes to investor’s funds and prepare them for rapid inflation which can be expected in the following months due to the excessive amount of capital being poured into the economy.
The second reason is the quarantine which has been enforced on various biggest gold producers in Switzerland due to the fact that they were in the proximity of the Italian region of Lombardy which is the epicenter of COVID-19 in Italy. As a result of this, the gold producers were compelled to stop their production. Also, the international expedition of this precious metal is currently limited. Currently, the amount of gold in its physical form is slowly decreasing.
The combination of high volatility with low liquidity results in extreme spreads on this precious metal and sometimes may lead to the inability to open or close a position.
More than this, we would like you to know that volatility not only on gold but also on all currency pairs and indices is extreme. You should consider this information when placing stop losses and volumes being traded.