Fears Over Resurging COVID-19 Cases Lift Gold Prices to a 1-Month High

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On Monday, the prices of gold climbed to its highest level since May 18 because of strong demand for safe-haven assets. The increase in demand for safe-havens was spurred by concerns about the second wave of COVID-19 infections which could delay the recovery of the global economy.

Spot gold is currently trading at $1,747.19 an ounce as of 0814 GMT.

The World Health Organization reported a record increase in the number of COVID-19 cases yesterday. The rising coronavirus infections dented investors’ appetite for riskier assets and lowered expectations for a faster economic recovery.

Even U.S. Federal Reserve officials have expressed pessimism over a quick recovery from the coronavirus. Federal Reserve Bank of Minneapolis President said the economic recovery could take longer than expected and warned that failure to contain the virus could reverse the recent job gains. Federal Reserve Bank of Boston President Eric Rosengren added that the lack of COVID-19 containment could eventually lead to prolonged shutdowns which in turn could result in lower consumption and investment and higher unemployment rate.

CMC Markets’ chief strategist Michael McCarthy commented that the increasing infection rates which triggered risk aversion are also putting pressure on the stock and foreign exchange markets. This environment is supportive of the yellow metal.

Another factor supporting the bullion is the geopolitical tension in Hong Kong. Senior Hong Kong lawyers have expressed concerns over some of the details released regarding the national security law for the territory. Under the draft legislation, the National People’s Congress will retain the power to interpret the law and Chief Executive Carrie Lam will have the power to appoint judges that will hear relevant cases.

In a related development, market speculators have raised their bullish stance in COMEX gold for the week which ended on June 16. Also, the holdings of the SPDR Gold Trust, the largest gold-backed exchange-traded fund in the world, increased by 2% last Friday to a,159.31 tons which reflects investors’ sentiments.

On the technical front, Reuters’ technical analyst Wang Tao predicts that spot gold may test a resistance price level of $1,767 an ounce. A break above this level could elevate the yellow metal to $1,796 per ounce.

 

Source – Gold hits 1-month peak as rising virus fears boost demand