James Hyerczyk
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Comex Gold

Gold futures are trading nearly flat late Wednesday as short-term investors try to figure out how to play the slew of off-setting news. Longer-term, I think you have to continue to lean toward the long side just on the amount of fiscal and monetary stimulus that has already been injected into the global economy, and the likelihood of more to come down the road.

At 18:41 GMT, August Comex gold is trading $1735.50, down $1.00 or -0.06%.

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The short-term factor helping to generate some support this week is the Fed’s announcement that it will begin buying corporate debt. The initial headline was extremely bullish, but hope faded as the Fed laid out the groundwork for the strategy.

On Tuesday, Federal Reserve Chairman Jerome Powell testified before Congress that the central bank would approach its new corporate bond buying plan based on market conditions, and would not “run through the bond market like an elephant.”

This statement alone was enough to squash the argument of the fear-mongering analysts who think the Fed and the White House are working in cahoots to keep interest rates near-zero to keep driving stock prices higher. The statement was also enough to keep a lid on gold prices.

Nonetheless, gold may have been underpinned by speculation of more fiscal stimulus. This time in the form of a new government infrastructure program. Bloomberg reported a potential $1 trillion infrastructure program from the White House.

Gold was also underpinned by a blog post by IMF Chief Economist Gita Gopinath. He cautioned that “the forthcoming June World Economic Outlook Update is expected to show negative growth rates even worse than previously estimated” and the current crisis is “unlike anything the world has seen before.”

Also underpinning prices were reports of a surge in COVID-19 cases in the United States and China. This went along with Powell’s warning that the American economy would not truly recover until the public is convinced that the coronavirus pandemic is under control.

However, this news was capped by reports of the discovery of a new drug which drastically reduces coronavirus death rates in seriously ill patients.

Short-Term Outlook

As you can gather from reading the news, the headlines and stories have been offsetting, leading to a rangebound trade.

Which headline will dominate over the near-term? It looks like the second-wave of coronavirus infections is starting to move to the forefront. If gold went up on this headline before, then it’s going to do it again especially if the U.S. is forced to enforce lockdowns and restrictions again.

For a look at all of today’s economic events, check out our economic calendar.

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