China's second wave concerns, reporting 19 new coronavirus cases in mainland

China has reported 19 new coronavirus cases in the mainland as of end-June 29 vs 12 a day earlier. 

In general, China has successfully "flattened the curve" in recent months, however, this follows news that the late spikes in Beijing have authorities fearing a possible second wave.

While the 19 new coronavirus cases sound like a small number compared with the thousands of daily cases in the US or South America, several neighbourhoods in Beijing were put under restrictions, travel was limited, and a massive wave of fresh testing has been rolled out.

Before the recent spikes, the Chinese capital had gone 57 days without a locally-transmitted case.

After passing 80,000 confirmed cases at the start of March, the nation first in is now first out and has added only around 4,700 since then. 

Market implications

However, a close eye will be kept on developments all the while the US struggles to battle the contagion throughout various states in its own second wave. For the time being, markets are taking the news in its stride, although the ramifications of a prolonged lockdown will likely serve as a deterrent for investors, preferring to stay on the sidelines. 

Gold is on the edge of a breakout

Analysts at TD Securities explained that while resurgent fears that a second wave of Covid-19 could result in yet another disinflationary lockdown may have interrupted the yellow metal's imminent breakout – gold prices quickly shrugged off the concerns as real rates continued to fall.

Indeed, with rates vol constrained, rising long-term inflation expectations have been a powerful driver lifting gold prices higher.

Price action continues to lend strength to our view that gold's role is shifting from a safe-haven asset, to an inflation-hedge product.

Looking forward, we also see substantial room for this driver to run, as the entire maturity spectrum of inflation breakevens are still priced below policy objectives. In this context, declining real rates should imminently support gold prices into the $1800s.

The world-war era fiscal and central bank stimulus, the change in the central bank template that will incorporate 'symmetric inflation targets' and unwinding globalization, also suggest that inflation-hedge assets may grow in popularity.

Eventual tailwinds in commodity demand should also be particularly supportive of silver prices, which have retained their historically high sensitivity to their industrial component.