The prices of gold rose on Monday as a new wave of COVID-19 infections in several countries raised hopes for further economic stimulus and lower interest rates.
Yesterday, Chinese and South Korean authorities warned of a new wave of coronavirus infections. In Germany, new infection accelerated again after the government loosened social restrictions.
Spot gold is currently trading at $1,703.97 as of 0901 GMT.
The gains of the precious metal were checked by the stronger Asian stock market and the firmer U.S. dollar. Investors were optimistic about the reopening of economic activities in more countries despite the increase in new coronavirus cases.
According to IG Markets analyst Kyle Rodda, the yellow metal is likely to advance further in the long-term because of the low-interest environment, accommodative fiscal policies and high inflation rate. He said there is a lot of technical support for the bullion at the $1,700 an ounce level. Rodda also noted investors’ interest in buying gold at this time in anticipation of further price increases.
But Kedia Commodities director Ajay Kedia commented that without a new fundamental trigger, like the Sino-U.S. trade war, gold may slide down to $1,680 an ounce. The price decline is likely to be limited though because the precious metal remains supported by interest rate cuts, fears of recession and the second wave of COVID-19 infections.
Meanwhile, the U.S. Labor Department reported that the American economy lost a record 20.5 million jobs in April due to the pandemic. In this regard, Federal Reserve officials warned that the U.S. economy cannot be expected to recover quickly.
On the trade front, the International Monetary Fund warned the U.S. and China against restarting a tariff war. A trade dispute between the two largest economies in the world could significantly affect the recovery of the global economy from the coronavirus crisis.
In a related development, the U.S. Commodity Futures Trading Commission has reported speculators have lowered their bullish stance in COMEX gold contracts for the week which ended on May 5, 2020.