The prices of gold remain flat on Wednesday as opposing forces counteract their influence on the yellow metal. The bullion is supported by the surge in new COVID-19 cases in China and the U.S. and the geopolitical tensions in Asia. But its gains were capped by the stronger U.S. dollar and the discovery of potential COVID-19 treatment.
Spot gold was trading at $1,715.45 an ounce as of 10:02 GMT.
There were several new cases of COVID-19 in China for six consecutive days, according to Chinese officials. In the U.S., six states reported record highs of new infections including Arizona, Florida, Oklahoma, Oregon and Texas.
Yesterday, the Indian Army reported that 20 of its soldiers were killed in clashes with Chinese troops in Ladakh in the disputed Kashmir region. The Indian External Affairs Ministry accused China of violating the Line of Actual Control agreement in the Galwan Valley. Also yesterday, North Korea blew up a joint liaison office in the border town of Kaesong that was set up in 2018 to improve relations with South Korea.
The destruction of the building is a major blow to South Korean President Moon Jae-in’s efforts to convince North Korea into cooperation and U.S. President Donald Trump’s hopes of encouraging North Korea to stop its nuclear weapons program.
The developments mentioned above all support the pricing of gold as the precious metal is generally considered a safe-haven asset in times of political and financial uncertainty. But its gains were limited by the result of clinical trials which found that the widely used steroid called dexamethasone can reduce the death rates of severely ill COVID-19 patients by around a third. Also weighing on the bullion is the 0.1% increase in the value of the U.S. dollar against a basket of rival currencies. The greenback was lifted by a record increase in retail sales which reinforced views that the recession in the U.S. might be drawing to an end.
OANA senior analyst Jeffrey Halley commented that gold remains supported by COVID-19 resurgence and the geopolitical tensions in Asia.