Gold prices rose on May 11, maintaining their strength above the critical $1,700 per ounce support level. This has happened as a new wave of COVID-19 infections in some countries increased infections of more stimulus measures and lower interest rates.
Spot gold appreciated by 0.5% to $1,708.75 per ounce by 0325 GMT. The precious metal had lost around 1% in the previous trading session. U.S. gold futures eased 0.1% to $1,711.70. IG Markets analyst Kyle Rodda said:
“People have bought the dip. Even in the best of circumstances, we are still in an environment where (interest) rates are going to remain very low; fiscal policies are going to remain very accommodative, and inflation is going to be high.”
Gold now has a significant chance to move higher in the long term; and the investors are striving relentlessly to get some of the yellow metal before it surges, according to Rodda. He also said that there was a lot of technical support that has formed around the $1,700 level.
Factors Affecting Gold Price
Massive stimulus measures tend to support gold prices since it is used as a hedge against inflation and many types of currency debasement. The dollar firmed as the Asian shares rose, which limited gains in bullion. Investors appear to be looking ahead to more countries restarting their economies; even as some of them reported an unwelcome surge in new coronavirus cases.
Chinese authorities reported on May 10 what might be the beginning of a new wave of virus cases in northeast China; as South Korea warned of a second wave of new infections. Looking at the impact of the health crisis; the U.S. economy lost a staggering 20.5 million jobs last month, according to a Labor Department report showed on May 8.
The U.S. Federal Reserve officials said some time ago that Americans should not expect that economic growth will quickly return as it has evaporated. Looking at the US-China trade front, the International Monetary Fund on May 8 warned Beijing and Washington against restarting a tariff war.
Any trade wars may weaken the recovery from the pandemic. The IMF also signalled a possible downward revision of global economic forecasts. Analysts and commentators minimized their bullish positions in COMEX gold contracts in the week to May 5; according to a May 8 U.S. Commodity Futures Trading Commission (CFTC).
During these times of uncertainties, investors are on ‘pause’ awaiting to see what will happen next.