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James Hyerczyk

Gold prices are trading steady to better shortly after the New York opening on Tuesday. Helping to underpin prices is a weaker U.S. Dollar Index, which fell from more than a two-week high, renewed worries of a resurgence in coronavirus infections in some countries and lingering trade tensions between the United States and China.

At 12:36 GMT, June Comex gold is trading $1701.60, up $3.60 or +0.21%.

The U.S. Dollar Index is being pressured by a surge in the Euro, which may have been driven by weaker than expected U.S. consumer inflation data.

The U.S. consumer price index fell 0.8% as expected, doubling the prior month’s decline.

Gold traders are also zeroing in on reports of new coronavirus cases around the world. This is potentially bullish because a new wave of cases would be devastating to the global economy, forcing more fiscal and monetary policy stimulus into the financial markets, which would weaken domestic currencies, while making gold a more desirable asset.

The central Chinese city of Wuhan reported five new cases on Monday, casting doubts over efforts to lower coronavirus-related restrictions across the country as businesses restart and individuals went back to work.

In Germany, the Robert Koch Institute reported that the “reproduction rate” – the number of people each person infected with the coronavirus goes on to infect – had risen to 1.1. Any rate above 1 means the virus is spreading exponentially.

The worrisome news follows a fresh outbreak in night clubs in South Korea and a record number of new cases in a day in Russia.

Daily Forecast

The tentative price action in gold over the past few sessions suggests investors are torn between optimism over the gradual re-opening of the global economy and caution over the grim economic data.

Short-term, the market is being capped as investors assess the impact of the easing of restrictions. Longer-term traders, however, are being patience because they know that a resurgence in the spread of the virus will hit the economy hard and call for more financial aid from governments and central banks. The flooding of the markets with cash will be long-term bullish for gold prices.

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