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  • Gold bulls buying the dips as geopolitical backdrop improves for safe-haven trades.
  • US administration strengthened its belief that the origins of the virus are related to a laboratory in China’s Wuhan.

Gold is trading around $1,685 between a tight $1,681.49 and $1,689.41 range, consolidating the slide from US trading where the US dollar firmed to the 100 handle in DXY. 

Markets face a number of hazards

The markets are faced with a number of hazards, including trade war tensions which have reared their ugly head as the US administration steps-up consideration of economic measures against China, holding the nations accountable for the global pandemic of COVID-19. 

“In recent days, the president looks to have strengthened his belief that origins of the virus are related to a laboratory in China’s Wuhan,” a Nikkei Asian Review article reads. ” He has instructed intelligence agencies to gather information as quickly as possible.” The article goes on to say that US President Donald Trump has not ruled out punitive tariffs against China, painting them as the most powerful weapon on the table. The sentiment weighed on North American equities on Wednesday with benchmarks ending mixed – more on that here: Wall Street Close: US benchmarks end the day mixed. As 

“Gold prices have struggled to print new highs, as concerns surrounding a deflationary impulse amid the deep economic damage contrast sharply with the ballooning central bank balance sheets and fiscal deficits. Notwithstanding, ETF holdings continue to rise, signalling investment capital is flowing to gold in this context,” analysts at TD Securities explained. 

Indeed, we expect that when the dust settles, capital will seek to shelter itself from a prolonged period of negative real rates. A clean positioning slate in the CME and a high margin of safety for further CTA liquidations argue for further price gains.

As we move forward, a risk-aversion takes hold on the back of less auspicious economic data and mixed earnings reports, we can expect to see gold supported on dips and profit-taking. For the day ahead, there will be more critical data which is picking up on some of the lockdowns in the Australia March trade balance, China April trade balance and then the Bank of England policy meeting. Also, Japanese markets reopen today.

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