Gold near 8-year peak as coronavirus fears cast shadow over recovery

Gold prices rallied to a fresh near 8-year peak, as safe-haven demand surged on worries about the global economic impact of surging coronavirus infections around the world. However, improving economic data offset worries that surging COVID-19 cases in the United States could derail the world’s recovery.

Spot gold was trading 0.5 percent higher at $1,788.72 per ounce by 0738 GMT, having touched a high of $1,788.83 earlier, its highest since October 2012. U.S. gold futures were 0.4 percent higher at $1,807.15.

The number of coronavirus infections surged in the U.S. south and southwest, stoking fears that the caseload could prompt fresh lockdowns. On Tuesday, the U.S. government's top infectious disease expert warned that fresh coronavirus cases could more than double to 100,000 per day if the current rise goes further out of control. The surge has prompted California, Texas and Florida to shut recently re-opened bars in the last few days, while Australia has locked-down parts of Melbourne in order to halt a spike in cases.

China’s parliament passed national security legislation for Hong Kong yesterday, which came into effect on July 1 that will punish crimes of secession, subversion, terrorism and collusion with foreign forces with up to life in prison. The laws have already prompted Washington to begin withdrawing Hong Kong’s special status under U.S. law.

German retail sales rose sharply in May, reflecting a rebound in private consumption as Germany lifted restrictions imposed to curtail the spread of the coronavirus. Investors risk sentiment was also boosted by data showing China’s factory activity grew at a faster pace in June, with the Caixin/Markit manufacturing PMI rising to 51.2 compared with expectations for 50.5.

The greenback against a basket of currencies traded 0.1 percent down at 97.30, having touched a high of 97.80 on Tuesday, its highest since June 2; while the U.S. Treasury yields rose, with the benchmark 10-year note yield trading at 0.684 percent.

Investors now await the U.S. Institute for Supply Management’s purchasing managers’ index for manufacturing due later in the day, which is expected to show that activity in June continued to recover from an 11-year low recorded in April. Markets also eye the highly influential  U.S. non-farm payrolls report on Thursday, which is likely to show the economy added 3 million jobs in June.