The prices of gold dropped slightly on Wednesday as several countries started the gradual lifting of COVID-19-driven restrictions. The prospects of restarting economic activity and the recovery of the global economy have lowered the demand for safe-haven assets.
Spot gold is trading at $1,700.55 per ounce as of 0959 GMT.
The yellow metal has gained around 17% since mid-March. During the past three sessions, gold prices ended higher because of uncertainty in containing the coronavirus and the reemergence of the trade tensions between the U.S. and China.
U.S. President Donald Trump is threatening to impose new tariffs on China for its ineffective handling of the coronavirus. He also called on Beijing to be transparent about the virus’ origin. His administration is also working on an initiative to remove global industrial supply chains from China. COVID-19 has infected more than 3.7 million people globally, including more than 1.2 million in the U.S. The crisis has affected the performance of the U.S. services sector in April and which contracted for the first time in more than 10 years.
According to CMC Markets’ chief strategist Michael McCarthy, there is general market optimism as countries start to lift coronavirus lockdown. There is support safe-haven asset yen and the U.S. dollar has risen for four consecutive sessions. This is bad news for the precious metal because a stronger dollar makes gold more expensive for investors using other currencies. In addition, there are doubts if the U.S. will engage in another trade war with China while the global economy is recovering from the COVID-19 crisis.
Jigar Trivedi, a commodities analyst at Anand Rathi Shares and Stock Brokers, commented that the fear of another Sino-U.S. trade war is triggering an increase in investment demand.
In a related development, the holdings of the largest gold-backed exchange-traded fund SPDR Gold Trust grew by 0.4% yesterday to 1,076.39 tons. This is the highest level in seven years.