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

Vrasidas Neofytou
Head of Investment Research

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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):


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