Gold Remains Close to Two-Week Low As Several Economies Reopen

Indian Gold Prices

The prices of gold eased on Wednesday on improved optimism on the reopening of several economies. The economic restarts dented the yellow metal’s appeal as a safe-haven asset. But its decline was limited by the growing tension between the U.S. and China on the latter’s proposed security for Hong Kong.

Spot gold was trading at $1,708.48 an ounce as of 0836 GMT.

Ilya Spivak, a currency strategist at DailyFx, commented that the easing of COVID-19 restrictions and the expectation of an improvement in economic activity have affected the demand and pricing of the precious metal. But he noted that there is a lot of negativity, particularly related to the potential renewal of Sino-U.S. conflict. Spivak also mentioned the risk for people to become complacent and forget the long-term consequence of the coronavirus crisis.

The Asian stock markets shed some of their gains on growing concerns about the growing Sino-U.S. tensions. U.S. President Donald Trump said they are working on a “strong response” to Beijing’s plan to implement national security law in Hong Kong. The law could affect the territory’s separate legal status and its special economic status.

National Security Advisor Robert O’Brien believes the legislation threatens the status of Hong Kong as a financial hub and could lead to U.S. sanctions. U.S. National Economic Council director and Trump’s economic adviser Larry Kudlow said China is making a big mistake. U.S. Secretary of State Mike Pompeo added that the legislation would the “death knell” for Hong Kong’s autonomy.

Separately, the Trump administration and lawmakers are exploring ways to encourage American firms to move supply chains for critical products from China back to the U.S. Lawmakers are also working on legislation to strengthen U.S. response to the crackdown of Uighur Muslim minority in Xinjiang.

Another negative factor for gold is the improvement in U.S. consumer confidence in May indicating the country may be passed the economic slump due to the pandemic. The New York Stock Exchange has also opened for the first time in two months. There has been optimism about global economic prospects, but only one in five economists expect a V-shaped shape recovery from the pandemic.

 

Source – Gold hovers near 2-week low on hopes of economic recovery