As market players will assess coronavirus and geopolitical risks, gold will remain volatile, however, buying may emerge at lower levels amid persisting risks to the global economy.
Comex gold was trading marginally higher near $1,805/oz after a 0.9% decline on July 9. Gold fell amid some profit-taking after rallying to 2011 highs. It struggled to break past the $1,830 level while a rebound in the US dollar index pressurised prices. The US dollar index edged up on Julu 9 on upbeat US economic data and safe-haven buying amid rising virus cases globally. US weekly jobless claims rose by less than market expectations highlighting recovery in labour market.
Gold fell also on uncertainty about the pace of stimulus measures. The US is considering additional stimulus cheques for individuals but at a lesser level while EU leaders are struggling to come to a consensus on the recovery fund.
ETF outflows also showed some profit-taking by investors. Gold holdings with SPDR ETF fell by 1.75 tonnes to 1200.819 tonnes. This is the first decline in holdings with the fund since June 25. The rally in gold price to record high level in India added to demand concerns.
However, supporting the price is a global spike in virus cases, downbeat growth outlook and geopolitical tensions. On geopolitical front, the US-China have been at loggerheads over various issues and this has kept market players nervous about the trade deal. Adding to it, Australia-China tensions rose after Australia said it was suspending its extradition treaty with Hong Kong in response to security law. China warned that it reserved the right to take retaliatory action, Reuters reported.
Several Fed officials have expressed concerns about the pace of US economic recovery amid rising virus cases. Reports of job cuts by Wells Fargo and others and warnings of downsizing by United Airlines Holdings Inc. highlighted stress in the economy, a Bloomberg report said.
Gold has come off the highs but continues to trade above $1,800. We may see choppy trade as market players assess the virus and geopolitical risks, however, buying may emerge at lower levels amid persisting risks to the global economy.
NYMEX crude trades in a narrow range above $39 per barrel after declining 3.2 percent a day earlier. After days of range-bound movement, crude oil slipped on July 9, weighed down by a correction in the US market, rising virus cases, higher US crude stocks and easing supply worries relating to Libya. US equity market slumped 1.4 percent, erasing the gains of July 8.
The mixed trade in the market reflects uncertainty as players assess rising virus cases, weaker growth outlook and geopolitical issues against signs of economic recovery and hopes of stimulus measures.
On the supply side, US EIA weekly report noted an unexpected increase in crude stocks, which are still within sight of record-high levels. Adding to it is the uncertainty over OPEC production cuts.
Supply concerns relating to Libya eased as the Messla oil field and Sarir refinery resumed production, as reported by Bloomberg. Crude oil slipped after failing to hold above $41/bbl.
We expect choppy trade along with US equity markets, however, general bias may be on the downside amid rising virus risks. The focus during the day will be on IEA’s monthly outlook, US weekly rig activity report, storm activity in the Atlantic and development relating to virus outbreak.
The author is VP- Head Commodity Research at Kotak SecuritiesDisclaimer: The views and investment tips expressed by experts on moneycontrol.com are their own, and not those of the website or its management. Moneycontrol.com advises users to check with certified experts before taking any investment decisions.