Gold remained bid in early trading on Friday, underpinned by the prospect of further fiscal stimulus and simmering US/China tensions. Meanwhile, the US Dollar Index fell to its lowest levels since September of 2018.
CNBC reported that Senate Leader Mitch McConnell (R-KY) will be releasing the next stimulus bill next week. McConnell said on Tuesday that the GOP supported another round of stimulus checks as part of its coronavirus relief bill. He said: “We want another round of direct payments — direct payments to help American families keep driving our national comeback.” The news has prompted investors to seek assets such as gold that are considered a hedge against inflation and the debasement of currencies.
US/China tensions spiked again this week. On Friday, China ordered the US consulate in Chengdu to close. The move came in response to the closure of the Chinese consulate in Houston earlier this week. US Secretary of State Mike Pompeo justified the decision with the accusation that China is “stealing” US intellectual property.
Speaking at the Richard Nixon presidential library in Yorba Linda, California on Thursday, Pompeo maintained his critical tone. He said: “Today China is increasingly authoritarian at home, and more aggressive in its hostility to freedom everywhere else.” and added: “if the free world doesn’t change Communist China, Communist China will change us.” Geopolitical instability set off by US/China tensions underpins safe haven assets such as gold.
In the the hard hit United States, over 4 million cases of coronavirus infections and 144,000 fatalities have now been reported, according to Johns Hopkins University. The rise in global cases and rebounds in countries such as Spain and Australia has dampened risk appetite.
Energized gold bulls now look to the 2011 high and above it the major psychological level of $2,000.
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