Wednesday, July 8, 2020

Gold Shines Amid Covid-19 Woes, Hits 9-Year High

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News shaping
the markets today

     

What’s happening: Gold prices surged on Tuesday to close at their highest level in almost nine years.

What happened: With rising covid-19 cases in various parts of the world and concerns over the ability of the global economy to make a quick recovery, the yellow metal climbed past the $1,800 level on Tuesday.

Gold trading was propelled by strong flows into ETFs and continued decline in US treasury yields with expectations of more stimulus packages.

Why it matters: Precious metals, including gold and silver, have benefitted from their safe-haven status during the pandemic. With concerns over how deep the global recession may run and central banks of countries around the world providing massive stimulus packages, the XAU/USD had been on an uptrend since mid-June, when gold was trading closer to the $1,700 level.

The World Gold Council reported that gold-backed ETFs had recorded positive flows of 104 metric tons (valued at almost $6 billion) in June.

Volatility in the US dollar has also been a major influence on gold prices, with both considered safe-haven assets and competing as a hedging tool in trader portfolios. The US dollar index rose 0.1% to 96.83 on Tuesday after falling as low as 96.60 earlier in the session.

August gold reached a record intraday high of $1,809.90 an ounce on Tuesday, representing the highest settlement price since September 16, 2011.

September silver gained 0.6% to settle at $18.699 an ounce in the previous session, following a 1.4% rise on Monday.

What to watch: With coronavirus cases crossing 11.8 million globally, traders may continue to seek safe-haven options, supporting gold prices. Investors may choose to take profit today and short the yellow metal. Gold futures traded down 0.2% to $1,806.80 an ounce in the European session.

The Markets Today

     

US stocks will be in focus today, after Wall Street closed lower on Tuesday.

Context: US stocks closed lower on Tuesday, with S&P 500 ending its 5-session rally, as investors turned their focus on the resurgence of covid-19 cases in the country.

Details: Various Federal Reserve members said that with rising infections across several states, the US economy is likely to face more challenges ahead than was earlier anticipated.

During an interview with Bloomberg, Vice President Mike Pence said that the Trump Administration wants to cap the upcoming coronavirus stimulus package at $1 trillion.

With Texas, Arizona, California, and several other states reporting a spike in infections, total cases in the US crossed the 3 million mark.

After gaining 1.8% on Monday, the Dow Jones index dipped 1.5% to close at 25,890.18 yesterday. The S&P 500 snapped its five-session win steak, losing 1.1% to settle at 3,145.32. The Nasdaq 200 declined by 0.9% to 10,343.89, after hitting an intraday record high of 10,518.98 earlier in the session.

Shares of Shake Shack fell around 7% on Tuesday, after the burger chain reported weak preliminary sales for the second quarter.

Sunrun Inc announced plans to buy Vivint Solar in a $3.2 billion deal. Shares of both companies rose sharply following the announcement.

What to watch: The US economic calendar is light today, with only consumer credit data scheduled for release. Consumer credit, which declined by $68.7 billion in April, is expected to fall another $15.5 billion in May.

Meanwhile, investors will continue to assess the daily coronavirus numbers, with the US crossing 3 million infections and 131,000 deaths.

Other Markets: European indices were trading lower at 8:30am GMT, with the FTSE 100, French 40 and Dax 30 index down by 0.2%, 0.5% and 0.2%, respectively.

Support & Resistances
for Today

     

market snapshot

     

Futures at 0400 (GMT)

What else to watch today

     

UK’s supplementary budget, Canada’s housing starts as well as the US MBA mortgage applications and the EIA’s crude oil stocks, gasoline stocks and distillate stockpiles.