Gold prices jumped to their highest level since February 10 on lower U.S. Treasury yields and the resurgence of COVID-19 cases in several Asian countries. Benchmark 10-year yields plunged to their lowest in almost a week and lowered the opportunity cost of owning the non-interest-bearing bullion. The U.S. dollar also fell against a basket of rival currencies and made the yellow metal less expensive for investors using other currencies.
The surge in new COVID-19 cases in Asia boosted gold’s safe-haven appeal. Singapore announced school closures after recording the highest number of new infections in months. In Taiwan, the government implemented a two-week restriction on gathering and movements in Taipei and surrounding areas. The Taiwanese were alarmed, but President Tsai Ing-wen assured the people that they have sufficient supplies of anti-pandemic materials. India reported 311,170 new cases on Sunday, bringing the total coronavirus infections to almost 24.7 million.
Spot gold is currently trading at $1,853.32 per ounce as of 0851GMT.
DailyFX strategist Margaret Yang noted that the falling Treasury yields and the resurgence of coronavirus cases in the Asia-Pacific region lifted the demand for gold. But she argued that the main driver for gold in the short- and medium-term would be inflation.
Meanwhile, the U.S. Commerce Department reported on Friday that retail sales unexpectedly slowed down in April after rising by almost 11% in March. But it is expected to recover in the coming months amid the record savings of American households and the reopening of the economy.
Dallas Federal Reserve President Robert Kaplan raised concerns over the rising inflation expectations. He emphasized the imbalances between supply and demand for goods and labor that are leading to higher prices. A survey found that the higher prices dampened consumer confidence.
In another weak economic data, China’s factory output and retail sales both slowed down in April. Industrial production growth was in line with forecasts, but it was more than four percent lower than March. Meanwhile, retail sales rose only by 17.7%. It is way lower than the 34.2% in March and the expected 29.4% uptick.
On the technical front, Reuters technical analyst Wang Tao predicted that spot gold prices could climb to $1,876 since it has already broken a resistance at $1,847.