22.04.202110:39 Forex Analysis & Reviews: Gold muscles its way higher amid likelihood of third wave of coronavirus

On Wednesday, on the global spot market, the price of gold jumped by 1.13% and tested $1,797. 4, the highest level since February 25.

Gold also ended yesterday's trading at an almost two-month high. According to FactSet, such dynamics were shown by the most actively traded futures for the precious metal. The price managed to rise to the highest threshold since February 24.

In general, on the New York stock exchange COMEX, the gold futures contract for June closed the session on Wednesday at $1,793. 1. The gain totaled $14.70, or 0.8%. For comparison, on Tuesday, gold futures rose by 0.4%. Thus, in two trading days, the asset was able to edge up by 1.2%.

Meanwhile, commodity analysts note the signs of a strong uptrend. In 5 days, gold managed to soar by about 3.5% thanks to the bullish bias. Since the end of March, its price has increased by almost 7%.

The main driver for the growth is a new wave of COVID-19 across the world. The spread of new, more contagious strains of the virus and the rising death toll are adding fuel to the fire. Experts fear the third wave of the pandemic.

According to the Johns Hopkins Research University, more than 850,000 coronavirus cases have been recently recorded in the world. Experts estimate that since the middle of last month, this figure has grown twofold. Moreover, the situation in Asia, and especially in India, which has become one of the world's epicenters of the coronavirus, is of the greatest concern now.

India now ranks second after the US in terms of the highest rate of confirmed coronavirus cases as well as fourth in the number of deaths. According to official data, the latest figure has already exceeded 182,000. However, there are suspicions that the reading is significantly lower and does not reflect the actual situation. Only last night, the number of deaths from the virus totaled 1,700.

The epidemiological situation is also aggravated by the extension of lockdown measures in a number of European countries and the slow pace of vaccination in the world. All these factors jeopardize the recovery of the global economy. Yet, such a gloomy scenario is beneficial for gold, which is considered a safe-haven asset in times of market uncertainty.

In addition, gold receives support from the news about the fall in the US bond market. The rally of US Treasures hugely depends on the situation with the coronavirus. Growing concerns about the spread of COVID-19 in the world are weighing on the 10-year US Treasury yield, pushing it down.

Yesterday, US government bond yields declined to 1.554%. This indicator is 22 basis points less than the 14-month high that was recorded at the end of last month.

Undoubtedly, gold is taking advantage of US Treasures weakness. Besides, the confirmation of the fact that demand for the precious metal is growing can be the data on the assets of gold-backed funds. According to the latest information, assets under management by US ETFs are now estimated at more than 3,000 tons. This is almost 21 tons less than at the end of last month.

The jewelry industry considerably boosts demand for gold. This sector is trying to revive after last year's crisis. Unlike big investors, private investors are also actively investing in gold. They consider the current rise in gold a short-term upward movement as there are strong fundamental factors that may trigger its drop.

According to analysts at SberCIB Investment Research, the publication of new US macroeconomic reports, which are due today or tomorrow, may change the trajectory of gold in the near future. The negative short-term outlook for gold suggests a decrease to the $1,745 level. The price may fall to this level on Friday. April 23, experts say.

As for the positive scenario, gold may reach new historical highs. According to experts, if there is another surge in long-term positions, gold will be able to surge by 50% from today's price. Thus, the cost of an ounce will exceed $2,600.