Gold Falls on Stronger Dollar Amid Fears of COVID-19 Resurgence

India Gold

The prices of gold fell on Monday as the U.S. dollar remains close to its highest level in more than a week. The decline of the yellow metal was somewhat limited by fears of COVID-19 resurgence which dented investors’ risk appetite and sent oil prices and Asian stocks down.

Spot gold was trading at $1,714.04 an ounce as of 0936 GMT.

CMC Markets’ chief strategist Michael McCarthy commented that the precious metal is currently caught between two opposing forces. One is the stronger dollar and the other is the risk-off force which supports gold and weighs on stocks and industrial commodities. But AxiCorp’s chief market strategist Stephen Innes argued that the bullion remains supported given the weak economy, the low-interest-rate environment and the second wave of COVID-19. Though it may need a significant policy input from the U.S. Federal Reserve to bounce higher, he said.

In the U.S., there were record numbers of new coronavirus cases and hospitalizations. The states affected include Alaska, Arizona, Arkansas, California, Florida, North Carolina, Oklahoma and South Carolina. Health officials attribute the increase in COVID-19 cases partly to Memorial Day gatherings.

In China, there was no new COVID-19 case for almost two months until an infection was reported on June 12. Since then the number of infections has climbed to 51. All these cases were linked to the Xinfadi wholesale food market which raised concerns about a resurgence of the disease. To prevent another outbreak, the government has ramped up testing and ordered a 14-day quarantine for people who visited the Xinfadi market.

While China is worried about the second wave, the economic impact of the first can still be felt. Industrial output grew by only 4.4% which is lower than analysts’ prediction of 5%. Retail sales and fixed asset investment both dropped higher than expected.

In a related development, the holdings of SPDR Gold Trust, the largest gold-backed exchange-traded fund in the world, rose by 0.1% to 1,136.22 last Friday. Also, market speculators cut their bullish stance in COMEX gold contracts for the week which ended on June 9, 2020.

 

Source: Gold slips as dollar firms amid second wave of coronavirus infections