The prices of gold increased on Monday as the lingering concerns over the negative impact of the COVID-19 pandemic on the global economy lifted the demand for safe-haven assets.
The Asian stock markets had a minor rally as investors were motivated by the slowdown in the number of new cases and deaths related to the coronavirus pandemic. Meanwhile, the greenback soared to more than one-week high against a basket of rival currencies, which made the precious metal more expensive for investors using other currencies.
U.S. gold futures dropped by 0.4% to $1,639.40 while spot gold prices rose by 0.1% to $1,617.75 as of 0444 GMT.
AxiCorp’s chief market strategist Stephen Innes said that gold is looking good and it is likely to remain that way. He explained that the bullion will be supported by the weak global economic conditions and the dollar is not likely to maintain its current strength.
Religare Broking Ltd.’s vice president of metals, energy and currency research Sugandha Sachdeva added that gold will remain the preferred investment in the low-interest environment. She also said that the global economic slowdown caused by COVID-19 will support gold’s extended rally.
The coronavirus outbreak has already killed more than 65,000 people and compelled many governments to implement stimulus measures. In the U.S., a Federal Reserve official remarked that the $2.3 trillion relief package approved by Congress is sufficient and will no longer require further relief effort. In Japan, Prime Minister Shinzo Abe plans to declare a state of emergency as the number of COVID-19 infection in Tokyo has reached more than 1,000.
Innes commented that if Japan starts rebasing its currency, it will be positive for gold. Another positive development for the bullion is the plan of the three largest gold refineries in the world to reopen partially after around a two-week closure.
In a related development, the holdings of the largest gold-backed exchange-traded fund in the world SPDR Gold Trust increased by 0.7% last Friday to a total of 978.99 tons. This is SPDR’s highest inventory level in more than three years.