Gold was up in Asia on Tuesday morning, as investors increasingly turned to the safe-haven asset given the continuous increase of the number of COVID-19 cases globally without signs of abating soon. As of July 7, data from Johns Hopkins University revealed that there were over 11.5 million cases globally, with the United States accounting for about 3 million of them.
Gold futures were up by 0.06% at $1,794.65 by 10:12 PM ET (3:12 AM GMT), moving closer to the 1,800 mark. Stocks, which typically move inversely to gold, were also up on Tuesday.
In the midst of this, the U.S. reported an Institute of Supply Management (ISM) Non-Manufacturing Purchasing Managers’ Index (PMI) of 57.1 for June on Monday. While the figure exceeded analyst forecasts noting that the U.S. services sector is back on a growth trajectory, investors are still cautious about the recovery of the global economy as COVID-19 numbers keep increasing with no cure in sight.
These events will give gold a boost in the short term. The impact of government stimulus measures globally will also impact the commodity.
Stephen Innes, Chief Global Market Strategist at AxiCorp in a note to Nairammetrics, explained in detail why Gold is edging up.
“Gold edges higher as COVID-19 cases increase concerns, offsetting positive data. While the upside is intact, $1,800/oz is stiff resistance. Gold managed to trade up despite a rise in “risk-on” investor appetite and COVID-19 concerns, which do not appear to be going away, are providing underlying support.”
Commenting on the impact of the U.S. on the price of the commodity, he added that “U.S. fatalities are now above 130,000; as US cases approach 3 million, about a quarter of the entire known global caseload, it raises the level of political discord in the US. Given that the genesis of the “risk-on” shift was only a China Times article encouraging China retail investors to buy stocks, gold investors quickly looked through the market pump.”
“However, one reason the markets remain positive over the longer-term is that gold is tied to government spending and accommodative monetary policies outside the US,” he added.