Commodity Market: Gold hits fresh 104-month highs as COVID-19 resurgence adds to stimulus prospects

Gold extended gains from the previous two trading days and hit highs not seen since early November 2011 on Wednesday, as continuing spread of the coronavirus across the United States and elsewhere added to prospects of more stimulus, supporting demand for the haven metal.

The number of confirmed cases of the COVID-19 illness in the United States surpassed 3 million on Tuesday, with more states reporting a record surge in new infections.

“The main focus continues to be on the U.S. If the curve continues to steepen and the virus unabated, we are going to break $1,800 just for the fact that the Fed will have to be forced to add more stimulus,” Stephen Innes, chief market strategist at AxiCorp, said.

Central bank stimulus measures tend to support Gold, as the yellow metal is largely considered as a hedge against inflation.

Additionally supporting risk-off mood, three Fed officials warned that surging new coronavirus infections could jeopardize consumer spending and job gains just as some stimulus programmes are set to expire. One official hinted at more support from the Federal Reserve in the future.

“The health, financial and economic uncertainties generated by the COVID-19 pandemic and its aftermath are likely to continue to support gold’s rally well into 2021, but at a reduced level,” HSBC analysts stated in an investor note.

As of 9:30 GMT on Wednesday Spot Gold was edging up 0.25% to trade at $1,799.67 per troy ounce, after earlier touching an intraday high of $1,801.31, or a price level not seen since November 8th 2011 ($1,803.02). Meanwhile, Gold futures for delivery in August were inching up 0.06% on the day to trade at $1,810.95 per troy ounce, while Silver futures for delivery in September were up 0.18% to trade at $18.733 per troy ounce.

The US Dollar Index, which reflects the relative strength of the greenback against a basket of six other major currencies, was retreating 0.12% on Wednesday to 96.86, still hovering above recent 1 1/2-week lows.

Meanwhile, near-term investor interest rate expectations were without change. According to CME’s FedWatch Tool, as of July 8th, 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 July 7th.

Daily Pivot Levels (traditional method of calculation)

Central Pivot – $1,788.82
R1 – $1,803.85
R2 – $1,812.45
R3 – $1,827.48
R4 – $1,842.51

S1 – $1,780.22
S2 – $1,765.19
S3 – $1,756.59
S4 – $1,747.99