Commodity Market: Gold set for best week since early April as a spike in new COVID-19 cases, dovish Fed fuel risk aversion

Following a drop from highs unseen in over one week on Thursday, Gold attempted to rebound during European trade on Friday as concerns over a second wave of COVID-19 infections and the Federal Reserve reasserting its emphasized dovish stance supported safe haven demand.

The precious metal, having risen almost 3% so far this week, looked set for its best performance since the business week ended April 10th.

Risk aversion led to a sell-off in Asia on Friday. Japan’s Nikkei 225 closed 0.75% lower, Hang Seng retreated 0.71%, while Australia’s S&P ASX went down 1.97%. Asian shares followed a “red wave” across North American exchanges on Thursday. Dow Jones 30 Industrial Average retreated 6.90%, the broader S&P 500 Index lost 5.89%, while Canadian S&P/TSX 60 dropped 3.95%.

As of June 11th, the number of confirmed cases of the COVID-19 illness across the globe surpassed 7.34 million, while the death toll reached 416,430. Cases in Europe rose to 2,116,586, while the illness caused the death of 180,974 people. In the United States, confirmed cases rose to 2,000,464, while reported deaths were 112,924.

A total of 136,757 new cases worldwide were reported on June 11th, up from 135,578 on June 10th.

Meanwhile, at its latest policy meeting earlier this week the Federal Reserve reiterated a commitment to use the full range of tools in support of the economy and also indicated that borrowing costs would probably stay at levels close to zero until the end of 2022, as recovery is seen at a long distance ahead.

An environment of lower interest rates tends to benefit the yellow metal due to lower opportunity cost of holding bullion.

As of 9:35 GMT on Friday Spot Gold was gaining 0.49% to trade at $1,735.85 per troy ounce, after earlier touching an intraday high of $1,736.26, or a price level not far from Thursday’s more than one-week high. Meanwhile, Gold futures for delivery in August were gaining 0.12% on the day to trade at $1,741.90 per troy ounce, while Silver futures for delivery in July were down 0.69% to trade at $17.765 per troy ounce.

The US Dollar Index, which reflects the relative strength of the greenback against a basket of six other major currencies, was edging down 0.10% on Friday to 96.71, still hovering at a short distance above Wednesday’s three-month low.

Today Gold traders will be expecting the preliminary data on US consumer sentiment by Thomson Reuters and the University of Michigan. The report is expected to show consumer confidence in the United States continued to improve in June, with the preliminary consumer sentiment index rising to a reading of 75.0 from a final 72.3 in May. The preliminary report is due out at 14:00 GMT.

Meanwhile, near-term investor interest rate expectations were without change. According to CME’s FedWatch Tool, as of June 12th, investors saw a 100.0% chance of the Federal Reserve keeping borrowing costs at the current 0%-0.25% level at its policy meeting on July 28th-29th, or unchanged compared to a day ago.

Daily Pivot Levels (traditional method of calculation)

Central Pivot – $1,731.14
R1 – $1,740.99
R2 – $1,754.77
R3 – $1,764.62
R4 – $1,774.46

S1 – $1,717.37
S2 – $1,707.52
S3 – $1,693.74
S4 – $1,679.97

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