Market Briefing: Gold hits 8-year highs as COVID-19 spike raises concern over the economy

Gold prices rose near 8-year highs at $1.770/oz on Monday, on risk aversion sentiment as investors are getting nervous due to the surge in fresh virus infections around the world. The resurgence in coronavirus cases is raising concerns about the economic reopening and recovery after some countries and US states resumed partial lockdowns, capping the bullish sentiment and market rally seen in the last two months.


Gold:

Gold prices received safety demand after the World Health Organization reported almost 190,000 new cases during the weekend, with more than 500,000 deaths recorded globally. The total number of global Covid-19 cases has now topped the 10 million mark, as India and Brazil have over 10.000 cases daily while US had 45.000 cases per day during the weekend. New outbreaks are reported in China, New Zealand, and Australia, prompting governments to impose restrictions again.

Fig.01: Gold price, Daily chart

Investors rotated into gold and away from riskier assets such as stocks and crude oil, after US reported 45,255 Covid-19 cases across the country on Friday, a new record for a single-day increase of cases, led by spikes in several states including Texas, Arizona, Florida, California and Nevada.

Gold price gained almost 2% last week supported also from the eased monetary policies from global central banks including aggressive bond buying, lower interest rates and money printing, to support their economies from pandemic fallout.


Market Update:

US markets fell 2% on Friday as coronavirus cases continue surging around the world, stoking concerns about the economic recovery, while Texas, California and Florida rolled back some of their reopening measures.

Fig.02: Dow Jones index, Daily chart

Asian markets dropped on Monday morning’s session, following the risk aversion sentiment from Wall Street. Nikkei and Kospi indices led the losses with -2.3% and -1.9% respectively, as retail sales in Japan were lower than expected.


Crude oil:

Crude oil prices fell 1% on Monday morning, extending last week’s losses on fears that spiking COVID-19 infections in large gasoline-consuming U.S. states such as Florida, California, and Texas (the three most populous U.S. states) could damage the fuel demand recovery.

Fig.03: WTI crude oil price, 1-hour chart

WTI crude finished last week with nearly 4% losses, losing the $38 per barrel level, while Brent crude ended the week with 3% losses but holding the key support level of $40.


Economic Calendar for June 29, 2020 (GMT+ 3:00):


Market Briefing: WTI crude rallies above $40 on OPEC+ output cut compliance

Crude oil prices jumped 3% on Friday, gaining support from the promise of the OPEC+ alliance members to meet their supply cut quotas, improving the rebalancing in the energy market. Both crude oil contracts trade above $40 per barrel for the first time after they dropped at early June due to the resurgence of COVID-19 cases around the world.


Coronavirus Update:

Global cases: More than 8.46 million
Global deaths: At least 453,216
U.S. cases: More than 2.18 million
U.S. deaths: At least 118,386


Crude oil:

WTI and Brent crude oil prices rallied by more than 3% at $40 and $42.70 per barrel respectively during the early Friday’s US trading session.

Fig.01: WTI crude oil price, 2-hour chart

The ministers of OPEC+ alliance met yesterday, where Iraq and Kazakhstan promised to meet their quotas agreed to the output cut deal back in May, to support the recovery of oil prices after pandemic. The OPEC+ alliance agreed to extend its record production cut of 9.7 million barrels per day (bpd) or 10% of global supply until end of July.

The recent jump in the oil prices overshadowed the worries for a second wave of virus infections in US and China, which could damage the recovery of the demand for petroleum products.


Market Reaction:

US futures advanced 1% on Friday morning in response to the plans of China to step up purchases of US farm goods to comply with the Phase One trade deal following the talks in Hawaii this week. The purchases were delayed in the previous months due to the pandemic disruption.

Fig.02: Dow Jones index, 2-hour chart

Meanwhile, the US stock markets closed slightly lower on Thursday, after the higher than expected initial U.S. jobless claims of 1.508 million. Furthermore, the market sentiment deteriorated after the states of Arizona and Florida reported record spikes in coronavirus cases.

Asian markets finished the last day of week with gains after a Chinese health expert said that the recent virus outbreak in Beijing was under control. However, the South Korean index was under pressure due to rising concerns about diplomatic tension with North Korea.


Forex Market:

The DXY-US dollar’s index climbed near two-week highs against a basket of currencies, as concerns about the resurgence of pandemic cases and escalated geopolitical tensions supported demand for safe-haven currencies.

Fig.03: EUR/USD pair, 2-hour chart

The EUR/USD pair dropped near key support level of 1.12, amid Euro weakness. The forex investors doubt whether the European Union would be able to pass an ambitious stimulus plan of 750 billion euros proposed by the European Commission, given that some countries including Denmark and Austria are opposed to handing out aid as grants.


Economic Calendar for June 19, 2020 (GMT+ 3:00):

Market Briefing: Global markets higher on improved economic data despite pandemic fears

Global financial markets edged higher this morning following the strong overnight gains in Wall Street and in growth-sensitive assets that was mainly fuelled from the improved US retails sales in May. However, the rally has paused on concerns for a second wave of infections in Beijing and the growing tensions in the Korean peninsula and recent clashes between Indian and Chinese troops.


Coronavirus Update:

Global cases: More than 8.15 million
Global deaths: At least 441,407
U.S. cases: More than 2.13 million
U.S. deaths: At least 116,905


Market Reaction:

US markets rose 2% on Tuesday after retail sales jumped by a record 17% in May, increasing the hopes for an economic recovery after the pandemic. In addition, markets celebrated the report that President Trump’s administration was preparing a $1 trillion infrastructure project to support the economy.

Fig.01: Dow Jones index, 2-hour chart

The Dow Jones index climbed 2% at 26.289, while the S&P 500 and Nasdaq Composite rallied 1.9% and 1.75%, respectively. The Dow Jones futures added another 200 points this morning, implying an opening near 26.500 or up 0.7% amid the improved risk sentiment.

However, the Asian markets ended with mixed results this morning, failing to follow the overnight gains from the US markets. The market sentiment deteriorated after China announced tightening of lockdown measures and raising the alert level in Beijing, to contain the renewed coronavirus outbreak in the city.


Precious Metals:

Gold price trades near monthly highs of $1.730/oz on Wednesday, gaining support from the fresh coronavirus outbreaks in China and the USA, the escalating geopolitical tensions between South Korea and North Korea and the recent clashes between Indian and Chinese troops.

According to reports, 20 Indian soldiers had been killed in clashes with Chinese troops at a disputed border site, while North Korea rejected a South Korea offer to send special envoys and vowed to send back troops to the border.

Silver price trades near $17.50/oz, receiving support from safety bids and higher industrial demand as the Chinese manufacturing activity resumed after lockdowns. Palladium price trades just above the $1.900/oz level, failing to break above the key resistance level of $2.000/oz.


Crude oil:

Crude oil prices surged 1% this morning adding to Tuesday’s 3% gains after the International Energy Agency raised its oil demand forecast for 2020. The WTI crude oil price climbed near $38.50 per barrel, while Brent crude trades above $41 per barrel.

Fig.02: Brent crude oil price, 2-hour chart

The IEA forecasted that the global oil demand would be at 91.7 million barrels per day in 2020, some 500,000 bpd higher than what it cited for May. However, it warned that a slump in air travel due to the coronavirus means the world will not return to pre-pandemic fuel demand levels before 2022.


Forex Market:

The DXY-US dollar’s index rebounded yesterday near the 97 level, in response to the better than expected US retail sales, while it also received safety bids amid growing geopolitical tensions and the virus outbreak in China.

Fig.03: DXY-US dollar’s index, 2-hour chart

However, the US dollar’s rally lost some steam this morning on improved risk sentiment and stock market rebound from the night losses, with investors rotating to more riskier currencies such as the Euro, Australian and New Zealand dollars.


Economic Calendar for June 17, 2020 (GMT+ 3:00):

Market Briefing: Global markets fall on new cases of COVID-19 in the USA and China

Global financial markets traded sharply lower on Monday morning’s trading session, on investor concerns for a second pandemic wave, after new outbreaks in Beijing’s wholesale food market over the weekend.
The fresh spike in infection cases in China followed the surging cases in US, India and Japan from last week, prompting fears of a second wave of infections and the potential economic damage it may cause.


Coronavirus Update:

Beijing reported its second consecutive day of record new numbers of COVID-19 cases on Monday, with 36 new cases for June 14, and the city’s highest daily infection count since late March. The recent outbreak has been traced to a major wholesale food market, Xinfadi, which accounts for 80% of Beijing’s farm produce supply sourced both domestically and from overseas.

India’s coronavirus cases have spiked over 320.000 in recent days, behind only the US, Brazil and Russia, according to Johns Hopkins University data. The daily reported cases in the country were about 10.000 per day over the last week, fuelling concerns the situation could spiral out of control even as the country starts to reopen after weeks of stringent lockdown.

Global cases: More than 7.9 million
Global deaths: At least 433,066
Worst-hit countries: United States (more than 2.09 million); Brazil (867,624); Russia (528,267); India (320,922) and the United Kingdom (297,342).


Market Reaction:

US futures dropped 3% on Monday morning, in response to the negative news for the virus outbreak in China over weekend.

Fig.01: Dow Jones index, 2-hour chart

Futures on the Dow Jones index dropped as much as 900 points, implying an opening near 24.700 points or -3.5% at the Monday open.
Asian markets opened the week with losses, following the overnight losses from the US markets. Kospi and Nikkei indices settled 4% lower, after China has shut down 6 wholesale food markets in the capital of Beijing to control a fresh spread of the Covid-19 virus during the weekend.


Crude oil:

Crude oil prices fell more than 4% this morning as the resurgence of the pandemic in the US and China could weigh on the recovery of fuel demand after the first pandemic wave in April.

Fig.02: WTI crude oil price, 2-hour chart

WTI crude oil price dropped 4.7% to $34.80 per barrel, while Brent crude traded 3.5% lower at $37.
80 per barrel. Both oil contracts lost about 8% last week, posting their first weekly declines since April.


Forex Market:

China-linked Australian and New Zealand dollars fell across the board on Monday on the backdrop of fresh lockdowns in China, while investors fled to the safety of the US dollar and Japanese Yen.

Fig.03: AUD/USD pair, 2-hour chart

Both AUD/USD and NZD/USD have lost nearly 3% from their multi-month highs, as investors booked some profits after the massive rally, on the risk aversion sentiment.

The DXY-US dollar’s index continued its rise from last week’s lows, gaining support from the sell-off in the risky assets such as stock market and risk-sensitive currencies. The index broke above 97.10 this morning, while the EUR/USD pair dropped near 1.125, well below its recent peak of 1.145.


Economic Calendar for June 15, 2020 (GMT+ 3:00):

Market Briefing: Markets plunge as COVID-19 resurges in the USA

Global financial markets suffered their largest one-day decline in three months on Thursday, mainly due to the recent rise in coronavirus hospitalizations in some US states which are reopening from the pandemic-linked lockdowns.

According to the latest reports, the number of virus cases has started rising faster in some U.S. states which rushed to reopen their economies, such as Texas, Arizona, North Carolina. Nashville has delayed moving into the next phase of its reopening process however an increase of cases was documented there as well.


Coronavirus Update:

Global cases: More than 7.5 million
Global deaths: At least 421,032
U.S. cases: More than 2 million
U.S. deaths: At least 113,818


Market Reactions: US markets moved 6% lower on concerns for a second wave of COVID-19

The US markets plunged by 6% yesterday, suffering their biggest one-day decline since mid-March, on the gloomy Fed’s US economic outlook for 2020 and the jump in coronavirus infections which threatens to slow down even further the economic recovery.

Fig.01: Dow Jones index, 2-hour chart

The Dow Jones index ended Thursday’s session with 6.9% in losses at 25.128, the S&P 500 slid 5.7% to 3.002, having its first three-day losing streak since March, while the Nasdaq Composite fell 5.3% to 9.492.

The concerns for a second wave of virus cases has forced investors to dumped stocks related to the progress of the economic reopening such as cruise operators, energy, airlines, casinos, and financials.

Asian markets dropped on Friday’s trading session, following the overnight losses in Wall Street and commodity prices over the fear for a second wave of COVID-19. Kospi and Nifty indices led the losses with 2% while Nikkei and Hang Seng ended the week with a 1% decline.


Volatility index-VIX jumps 50% on market sell-off

The Volatility Index which is considered the best fear measure in stock markets, jumped 50% yesterday, gaining support from the massive sell-off in the US equity markets and the broader risk-off sentiment.

Fig.02: VIX index, Daily chart

The VIX index rose to 41, its highest closing level since April 23, before retreating to 38 this morning, amid the rebound in US futures.


Crude oil:

Crude oil prices fell 8% on Thursday on concerns that an acceleration of virus cases in the US could slow the global demand recovery for petroleum products.

Fig.03: Brent crude oil, 2-hour chart

The WTI contract lost 8.2% to settle at $36.34 per barrel while Brent crude fell 7.7%, breaking below $40, to finish the day at $38.

Both oil contracts fell another 2% on Friday morning at $35.50 and $37.50 respectively, extending their overnight losses. The WTI contract lost almost $6 or 15% since it peaked at $40.50 per barrel on June 8th, while Brent crude lost $5.5 or 13% since topping at $43.50 at the same period.


Forex Market:

The US dollar and Japanese Yen were the strongest currencies across the board yesterday, mainly backed by safe-haven demand, in response to the broader sell-off in the risk sensitive currencies such as Euro, Sterling and Australian-New Zealand dollars.

The DXY-US dollar’s index which is a basket of major currencies, climbed to the 97 level, while the EUR/USD pair dropped near 1.13 and AUD/USD fell to 0.68.


Economic Calendar for June 12, 2020 (GMT+ 3:00):

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