Gold consolidates amid rising COVID-19 cases, China/US tensions

Gold hovered around the key psychological level of 1,800 in early trading on Tuesday, as global coronavirus cases continue to soar and Sino-US disharmony escalated over China’s pursuit of offshore resources in the South China Sea.

According to data from Johns Hopkins University, global COVID-19 cases have now risen to 13,113,181 with 573,288 fatalities. The US, Brazil and the UK have suffered the largest numbers of lost lives.

At a virtual briefing on Monday, WHO Director-General Tedros Adhanom Ghebreyesus gave a stark warning, stating; “Let me be blunt, too many countries are headed in the wrong direction, the virus remains public enemy number one.” He added: “If basics are not followed, the only way this pandemic is going to go, it is going to get worse and worse and worse. But it does not have to be this way.”

Meanwhile, risk appetite was dampened by fresh US/China tensions. On Monday, US Secretary of State Mike Pompeo announced a rejection of China’s maritime claims in parts of the South China Sea – calling China’s pursuit of resources ‘unlawful’.

He cautioned; “The world will not allow Beijing to treat the South China Sea as its maritime empire. America stands with our Southeast Asian allies and partners in protecting their sovereign rights to offshore resources, consistent with their rights and obligations under international law.”

A spokesperson from the Chinese embassy in the US repsonded by stating: “China’s position on the South China Sea issue has been consistent and clear-cut. While firmly safeguarding its territorial sovereignty and maritime rights and interests, China has been committed to resolving disputes through negotiation and consultation with countries directly involved, managing differences through rules and mechanisms, and achieving win-win results through mutually beneficial cooperation.”

The escalating geopolitical and economic uncertainty caused by the COVID-19 pandemic and US/China tensions serve to support safe havens such as gold. Looking at the daily chart we can see that price is near the recent high of 1,817 and that trendline support lies below. Gold bulls eye the 1,817 level for a breakout to the upside and a potential run to record highs.