Gold Inches Close to 8-Year High on Growing Fears of COVID-19

Gold

On Wednesday, the prices of gold held firm near an eight-year high as growing concerns about the economic impact of the resurgence of COVID-19 in many countries boosted the demand for the yellow metal.

Spot gold is currently trading at $1,786.76 an ounce as of 1022 GMT.

The recent spike in COVID-19 cases in the U.S. has dimmed the prospect for a quicker global economic recovery. Anthony Fauci, director of the U.S. National Institute of Allergy and Infectious Diseases, has even warned that if the current surge in coronavirus virus cases cannot be controlled, fresh cases could reach 100,000 per day. Both Federal Reserve Chairman Jerome Powell and U.S. Treasury Secretary Mnuchin pledged to do what they can to shield the economy from the further impact of the virus.

IG Markets’ analyst Kyle Rodda commented that investors currently prefer gold as an alternative to bonds and this is driven by a high degree of uncertainty about the recovery of the global economy. He also said that policymakers are likely to keep yields low to support and stimulate their economies. This will favor the bullion because lower bond yields reduce the opportunity cost of holding non-interest-bearing gold. CMC Markets’ chief strategist Michael McCarthy agreed and said that the funds injected into the global monetary systems need a place to go and investors currently prefer to put them in gold.

AxiCorp’s chief market strategist Stephen Innes added that the ascent of gold is being held back by risk-on sentiment and the incomplete weakness of the U.S. dollar against the euro. He said that if the greenback devaluates further, the yellow metal could reach $1,800 an ounce. Some recent better-than-expected data also weigh on the precious metal. In China, the Caixin/Market Purchasing Managers Index (PMI) increased from 50.7 in May to 51.2% in June. PMIs in Malaysia and Vietnam have also recovered to above 50.

The markets are currently waiting for the release of US ISM Manufacturing PMI due today and also the minutes of the Federal Open Market Committee’s June 9-10 meeting.

On the technical aspect of trading, Reuters’ technical analyst Wang Tao predicts that spot gold prices may test a resistance level at $1,789 an ounce. He said a break above the resistance price could push the precious metal up to the $1,795-1,806 price range.

 

Source – Gold holds firm near 8-year peak as growing virus fears lift demand