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Gold briefly chalked up another record Tuesday before easing later in the day as the dollar clawed back earlier losses, while equity markets struggled to hold on to gains with fears about the coronavirus pandemic mounting.
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With worrying new spikes in infections in Asia and Europe—on top of the already-high new US cases—forcing governments to impose strict containment measures, the global economic outlook remains clouded, putting the brakes on a months-long stocks rally.
The virus uncertainty descending on trading floors, combined with China-US tensions, sent gold soaring nearly 30 percent and on Tuesday it hit another record of $1,981.27, smashing the previous days all-time high, but it later pared the advance to sit lower for the day.
But observers say $2,000 could be broken as early as this week, with focus on the Federal Reserves next policy meeting, which is tipped to see it unveil more easing measures to support the worlds top economy.
US second-quarter economic growth data is also due this week, and a disappointing reading on what is expected to be a historic contraction could fuel further dollar weakness.
“Although little is expected on policy, (bank boss Jerome) Powells tone in the press conference will be key especially in light of the recent uptick in virus cases and the knock-on consequences,” said AxiCorps Stephen Innes.
The rush for bullion has also dragged silver to a seven-year high above $26 an ounce before that also edged back.
“There seems to be enough momentum in the US money supply to actually push gold higher,” Fat Prophets analyst David Lennox said.
“As COVID-19 continues to ravage the economy, theres probably more stimulatory action to come. As the US dollar weakens, obviously gold will improve, but its more a matter of the acceleration of US money supply, and thats caused by governments obviously throwing money into the economy.”
Pathetic proposal
There are hopes US lawmakers can hammer out a new economy-boosting stimulus programme as their previous multi-trillion-dollar package begins to dry up.
After an extended period of haggling with the White House, Republicans eventually unveiled a $1 trillion scheme that slashes unemployment benefits by two-thirds.
However, there are concerns bipartisanship could make the passage of any bill arduous, with Democrats proposing $3.5 trillion of spending, while House Speaker Nancy Pelosi branded the Republican offer “paRead More – Source
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