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Last Updated : May 15, 2020 07:52 AM IST | Source:

Gold digs in heels near $1,700 over fear of second wave of infections

Overall, gold is stuck in a range with no major triggers, however, there is a lot of uncertainty.

Moneycontrol Contributor @moneycontrolcom

Ravindra Rao

Gold's largely remained bound in the $1,680-1,750 range being seen for the last few days but some strength has been seen lately near $1,700 as equity markets and the US dollar index struggle for traction.

The US equity market witnessed a sharp 36 percent rally from late March to April-end but corrected more than 6 percent in the first few days of May. The US dollar index is struggling for direction as weaker outlook for the US economy is countered by concerns about health of other economies.


After an initial enthusiasm about easing of virus-related restrictions, risk sentiment has weakened amid worries about second wave of infections and warnings against rushed reopening of economies.

The initial hotspots like China and South Korea has seen a surge in cases. US health officers, too, have warned that rushed reopening could result in rise in cases.

Global cases have also topped 4.35 million with the US, Russia and the UK reporting most infections.

Economic indicators are reflecting the negative impact from the virus outbreak.

From a sharp rise in unemployment to a drop in consumer sentiment and inflation, virus-related restrictions have hurt all sectors.

Unless virus cases are controlled, restrictions in some form or the other will continue and this may slow down the efforts to revive economic growth.

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With increasing pressure on the economy, most central banks and governments are likely to continue with efforts to stimulate growth.

In last few days there has been an increasing debate over possibility of negative interest rate.

The Fed has, so far, maintained that it will not use negative interest rate as policy tool but if the economy continues to reel under pressure, it may be forced to act.

In his latest statement, Fed Chairman Powell said the economy will take many months to recover from the pandemic.

US-China tensions have added another uncertain element.

The US has been vocal in its criticism of China for its handling of the viral outbreak. Other countries like the UK and Australia have also questioned China’s role.

This issue is unlikely to be resolved soon and the market will react to statements coming from either side. The US-China relations are also important to gauge what will happen to the phase 1 trade deal reached in January.

Overall, gold is stuck in a range with no major triggers. However, there is a lot of uncertainty and this has kept investors interest high in the metal, keeping price near the coveted $1,700-an-ounce level.

The author is VP - Head Commodity Research at Kotak Securities.

Disclaimer: The views and investment tips expressed by expert on are their own and not those of the website or its management. advises users to check with certified experts before taking any investment decisions.

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First Published on May 15, 2020 07:52 am
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