Fundamental Comment

Gold leaps to one-month high on renewed corona infection fears

Gold leaps to one-month high on renewed corona infection fears

Gold prices climbed to a one-month high on Monday as frets about a second wave of coronavirus infections boosted safety demand on the precious metal, yet the price retreated as it approached $1760 an ounce.

After advancing 1.27 percent on Friday and locking its second straight weekly gain last week, the yellow metal resumed its rally to hit a new peak today at $1758.59 an ounce, the highest level since May 18.

However, gold failed to hold gains as it retreated to $1747 an ounce, as it stepped closer towards resistance located at $1760.

Meanwhile, there are worries that the corona pandemic could start another wave after many countries worldwide managed to flatten the curve and reopened their economic activities.

In Northern Germany, 1,000 abattoir infections were reported last week, thereby raising the virus reproduction rate from 1.06 to 2.88, the highest level in several weeks.

Also, a noticeable soar in corona new cases in the United States prompted Apple to close its stores in in four states.

On Sunday, the World Health Organization recorded the biggest single-day rise in Covid-19 cases by its count, at more than 183,000 new cases in the latest 24 hours.

This meant that the virus infection rate is accelerating once again after several economies reopened their business activity.  

Euro STOXX 600 index fell 0.23 percent to 364.63 points, trailing losses in Asia.

Another key factor that could interpret the latest gold rally is fears of high inflation, as major central banks continue to announce stimulus plans to bolster economic recovery.

Last week, the BOE boosted its stimulus by 100 billion pounds to a total of $745 billion pounds, while Fed Chair Jerome Powell urged Congress not to halt economic support to the economy.

In May, gold leaped to a top of $1765 an ounce, a level not touched since 2012, where it may target $1800 in the coming period, provided that the price breaches $1760.

Regarding the dollar’s latest rebound, it seems that it is not causing any concern to gold traders as both gold and dollar have been moving together since they are treated as safe haven assets.

The dollar index, which tracks the green currency’s movements versus a basket of major currencies, traded lower at 97.35, following its rebound from a low of 95.68 registered on June 10.

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