Gold shines as coronavirus surge unnerves investors
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[June 24, 2020] By
Tom Arnold
LONDON (Reuters) - Gold prices surged to
their highest in nearly eight years on Wednesday, while global shares
cooled as signs of an acceleration in coronavirus cases kept investors
on edge.
Fuelling concerns about the prospects for an economic recovery was data
showing several U.S. states seeing record infections and the death toll
in Latin America passing 100,000, according to a Reuters tally.
The New York Times reported the European Union was prepared to bar U.S.
travellers because of the surge of cases, putting it in the same
category as Brazil and Russia.
Adding to the gloom, European Central Bank chief economist Philip Lane
warned that the euro zone economy would need a long time to recover from
the pandemic-induced crisis and a string of solid data in recent days
was not necessarily a good guide to recovery.
And the United States is considering tariffs on $3.1 billion of exports
from Britain, France, Spain and Germany, Bloomberg news reported, citing
a notice published by the office of the U.S. Trade Representative.
All that and recent softness in the dollar, along with endless cheap
liquidity from central banks, helped spot gold gain 0.6% to $1,777.53
per ounce, having earlier hit its highest since October 2012 at
$1,779.06.
Global stocks were 0.4% lower and have been moving sideways in recent
weeks after rising more than 40% from March lows on hopes the worst of
the pandemic was over.
The sell-off in European shares deepened, with the pan-European STOXX
600 down 1.6%, heading for its worst day in nearly three weeks.
Positive sentiment was in short supply despite German business morale
posting its strongest rise in June since records began. The Ifo
institute said Europe's largest economy should return to growth in the
third quarter after the coronavirus pandemic hammered output in the
spring.
Emerging market stocks earlier climbed to a 3-1/2 month high, before
paring gains later. MSCI's broadest index of Asia-Pacific shares outside
Japan earlier touched its highest since lockdowns first cratered markets
in early March.
E-Mini futures for the S&P 500 was 0.9% lower.
"Global equity market futures are struggling to make gains today, likely
for no other reason than with rising daily COVID-19 cases in the U.S.
remaining front page news, the headlines are proving to be a weighty
burden to bear this morning," Stephen Innes, chief global market
strategist at AxiCorp, said.
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Gold grain is seen before being melted into 1kg gold bars during a
refining process at AGR (African Gold Refinery) in Entebbe, Uganda,
October 4, 2018. REUTERS/Baz Ratner/File Photo
"The trough in global growth is indeed behind us, but the recovery trajectory in
H2 remains uncertain."
Against a backdrop of concerns over a weaker U.S. dollar and that a jump in
infections will lead to more stimulus measures, gold should remain on a
reasonably constructive path, he said.
The euro traded flat at $1.1307.
The dollar regained some ground after two straight days of losses, gaining 0.1%.
"The dollar and risk sentiment are likely to remain broadly negatively
correlated, barring the U.S. displaying clear and enduring leadership in the
global economic recovery, something hard to square with the grim U.S. news on
COVID," said Ray Attrill, head of FX strategy at NAB.
The New Zealand dollar fell almost 1% after the country's central bank said it
might have to do yet more to stimulate the economy, including cutting rates
further, expanding bond purchases or even buying foreign assets.
Euro zone bond yields were broadly steady, with a focus on Austria which
launched the sale of a new 100-year bond that will raise 2 billion euros, one of
the longest-dated bond sales since the coronavirus crisis.
Germany will also visit the primary market with the first reopening of a 15-year
bond which is expected to raise 2.5 billion euros.
Oil prices were down as record high inventories and worries about a second wave
of the pandemic outweighed support from a gradual reopening of global economies.
Brent crude was down 1% at $42.20 a barrel, while U.S. West Texas Intermediate (WTI)
crude fell 1.4% to $39.81 a barrel.
(Additional reporting by Wayne Cole in Sydney; Graphic by Sujata Rao; Editing by
Raissa Kasolowsky and Alison Williams)
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