Gold Prices Jump Close to 8-Year High on Weak Dollar and COVID-19 Resurgence

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The prices on gold increased for the fourth consecutive session on Wednesday to reach its highest level since October 2012. The yellow metal was lifted by the decline of the U.S. dollar and the resurgence of COVID-19 infections. The concerns about the second wave of infections raised hopes for additional economic stimulus from central banks and boosted the demand for safe-haven assets.

Spot gold is currently trading at $1,776.05 an ounce as of 0931 GMT.

The greenback fell by 0.1% and remain close to its lowest level in over a week. The decline in the valuation of the dollar makes gold more affordable for investors using other currencies.

Meanwhile, a Reuters tally showed that several U.S. states reported a record number of new infections yesterday. Arizona, Nevada and Texas had record new infections for the second straight week. Ten other states including California and Florida are dealing with a resurgence in COVID-19 infection. The total number of coronavirus cases in the U.S. has risen by 25% in the week which ended on June 21 compared to the previous week.

In Latin America, the COVID-19 death toll has surpassed the 100,000 mark. Brazil reported 39,436 new cases and 1,374 deaths yesterday and became the second country to reach the 50,000 death milestone, after the U.S. It already has a total of more than 1.1 million confirmed cases and 52,771 deaths. Mexico is the second most affected country in the region which reported 6,288 new infections and 793 additional deaths yesterday. It has a total of 191,410 confirmed cases and 23,377 deaths.

The situation has forced European Union countries, eager to revive their economies, to consider banning travelers from the U.S. This will put the U.S. in the same category as Russia and Brazil. But the travel ban proposal has not yet been finalized.

ANZ analyst Daniel Hynes commented that fears of the second wave in the U.S. and Latin America have fueled concerns about the weakness of the global economic recovery and created an environment supportive of safe-haven assets such as gold. Also, the expected monetary policy easing and release of further stimulus by many central banks around the world will keep interest rates low. The yellow metal benefits from widespread stimulus measures because it is considered as a hedge against currency debasement and inflation.

In a related development, the largest gold-backed exchange-traded fund in the world SPDR Gold Trust reported that its holdings increased by 0.28% yesterday to 1,169.25 tons. It reflects current market sentiments.

 

Source – Gold soars to near 8-year high as fears of second virus wave grow