Commerzbank: expansion of liquidity should continue to boost gold price

Berlin-Germany (Apr 29)  Commerzbank looks for gold to remain underpinned by efforts of central banks, including the U.S. Federal Reserve, to expand liquidity, said Commerzbank. While easing slightly so far this week, the metal remains above the $1,700-an-ounce level that it reclaimed this spring for the first time in seven years. Besides monitoring economic data, the market’s immediate focus is the outcome of a two-day Fed meeting that winds up Wednesday. “We do not expect any new decisions to be taken at the meeting given that the Fed in March and April already set in motion far-reaching measures to combat the crisis caused by the [COVID-19] lockdown,” said analyst Carsten Fritsch. “As a result, the Fed’s balance sheet already soared by a good $2 trillion to $6.4 trillion in the space of five weeks. The ongoing bond purchases and various credit facilities could even see the balance sheet rise to $10 trillion in the next few months, which would equate to nearly half of U.S. GDP [gross domestic product]. This unprecedented expansion of liquidity should continue to boost gold, as gold cannot be reproduced at will in the same way.”

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