Flaring Sino-US tensions, the weakening of the US dollar, and a drop in US 10-year T-notes are pushing precious metals to historic heights, especially ounce gold.
Gold goes for record highs
The tensions between the two major economies of the world, the US, and China along with global coronavirus pandemic is leading investor sentiment to safe havens.
On Monday, during the Asian morning trading hours, the spot price of an ounce gold (XAUUSD) rose to $ 1944.99. This record overshadowed the highest levels last seen in September 2011.
A strengthening anti-Chinese Communist Party rhetoric led like a personal crusade by the US Secretary of State Mike Pompeo is now shared by almost all political fronts in Washington. The US and China are going full-throttled to opposite ends on issues such as Hong Kong’s status, CCP’s treatment of the Uighur people in Xinjiang, the Tibet question, Taiwan’s security and the Chinese territorial claims on South China Sea, along with what appears to be a decoupling in trade and technology.
A decline in the yield on the 10-year Treasury note last sat at 0.5856% as the coronavirus epidemic sweep the southern and western states. A weakening of the US dollar also strengthens the gold and other precious metals feeding on China-US tensions.
The US dollar index (USDX) priced against a basket currency peers continued to fall from the peak in March to 93.76, last seen over two years ago.
The Japanese yen and euro strengthened their upward momentum against the US dollar.
The sentiment in business circles in Germany continued to recover in July after the biggest decline of the last decades. German companies expect Europe’s powerhouse economy to survive the coronavirus shock, as long as the second wave of infections is avoided.
Ifo institute said on Monday that its Business Climate Index rose from 86.3, which was revised upwards in June, to 90.5 in July. This was the third consecutive increase and a higher than expected reading.
“The German economy is recovering step by step,” Ifo President Clemens Fuest said, adding that companies are much more satisfied with their current business situation.
The government hopes that a stimulus package of more than 130 billion euros, including a temporary VAT cut to boost domestic demand, will help the economy return to growth.
Ifo survey shows that consumers are starting to open their wallets as the industrial activity is gradually rising. Surprisingly strong Ifo figures are evidence that the German economy made a good start at the beginning of the third quarter.
US aid package
The US Senate Republicans are expected to announce on Monday a new $1 trillion aid package to counter the ongoing coronavirus crisis. The GOP offer hammered out with the White House is posited as a starting point for talks with the Democrats.
White House chief of staff Mark Meadows told reporters on Sunday that the finishing touches were given to the package so that Senate Majority Leader Mitch McConnell could announce the Republican proposal Monday afternoon.
Meadows and US Treasury Secretary Steven Mnuchin said that the package they had agreed on in principle with the Senate Republicans would include extending additional unemployment benefits, covering 70% of the wages of laid-off workers.
While Congressional Democrats accuse Republicans of wasting time in their negotiations, they prepare to offer a $3.5-trillion package.