22 June 2020

Gold Shines Amid Rise in Covid-19 Cases

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News shaping
the markets today

     

What’s happening: Bearish sentiment and more discipled risk management by traders drove gold futures trading higher on Friday, adding further gains for the week.

What happened: With investor concerns around the increase in coronavirus cases in the US and China, the demand for gold rose sharply. Traders and investors added safe-haven options to their portfolios, even as stock benchmarks posted gains for the week.

Downbeat comments from a Federal Reserve member also boosted demand for the yellow metal.

Why it matters: The covid-19 pandemic is haunting the US again amid reopening attempts, with various states, including California, Texas, Arizona and Florida, reporting a rise in coronavirus infections.

Meanwhile, during his speech on Friday, Boston Federal Reserve President Eric Rosengren signaled a prolonged shutdown due to the resurgence of covid-19 cases, which could further disrupt the economy.

Although European Union leaders reinitiated discussions on a massive stimulus plan on Friday, the debate has been on for several week and some members continue to be wary of signing the proposal, adding to market uncertainties.

August gold rose 1.3% to end at $1,753 an ounce on the Comex on Friday, settling at the highest price since mid-May. Gold prices closed the week higher by around 0.9%, rising for the second consecutive week.

July silver gained 1.9% to $17.847 an ounce on Friday, adding about 2.1% for the week.

What to watch: Goldman Sachs lifted its 12-month outlook for gold by 11% to $2,000 an ounce, in the low interest rate environment around the world. Traders expect the precious metal to gain further this week, with bearish sentiment dominating. Gold futures trading rose by 0.6% to $1,763.90 in the European session.

Investors will focus on US durable goods, GDP numbers and jobless claims data due for release on Thursday, which could determine the direction for gold trading market.

The Markets Today

     

US stocks will be in focus today, ahead of various economic reports scheduled for release later in the day.

Context: US stocks closed lower on Friday, after posting strong gains earlier in the session. News of a resurgence in coronavirus cases affected investor sentiment, exerting pressure on stock and forex trading.

Details: Stocks started the last day of the week on a very positive note after news of China planning to increase purchases of US farm products to initiate phase one of a trade deal between the world’s two largest economies.

Stocks pared gains, however, as the day progressed with reports of a rise in infections in Arizona and Florida as these states continued with their plans to reopen their economies in a phased manner. Concerns were further fuelled by Apple announcing the closure of around 11 stores in Arizona, Florida, South Carolina and North Carolina.

After gaining around 371 points previously in the session, the Dow Jones index closed lower by 208.64 points at 25,871.46 on Friday. The S&P 500 slipped 0.5% to 3,097.92, while the Nasdaq 100 rose 3.07 points to 9,946.12.

Despite this, all three major indices recorded modest gains last week, with the S&P 500 rising 1.8% and the Dow Jones index inching up 1%. The tech-heavy Nasdaq 100 was again the best performer, spiking 3.7% for the week.

What to watch: Investors await reports on US existing home sales and the Chicago Fed National Activity Index. Sales of existing houses in the US, which fell 17.8% to an annual rate of 4.33 million units in April, are expected to decline 2.3% in May. The Chicago Fed National Activity Index, which plunged to a record low of -16.74 in April, is likely to record some improvement in May.

Markets continue to assess the covid-19 numbers, with the total cases approaching 9 million globally. The US has so far reported 2,279,870 infections with around 119,960 deaths.

Other Markets: European indices were trading lower at 8:30am GMT, with the FTSE 100, French 40 and Dax 30 index down by 0.8%, 1.1% and 0.9%, respectively.

Support & Resistances
for Today

     

market snapshot

     

Futures at 0400 (GMT)

What else to watch today

     

UAE’s inflation rate, UK’s CBI industrial trends orders and the Eurozone’s consumer confidence.

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