Gold got rejected above the $1,700 level again, declining more than 2%
Stocks erase overnight gains from the Asian session
The U.S. dollar pulls back against major counterparts
Stocks Back in Rollercoaster Mode
U.S. stocks were little changed as the gains made by stock index futures in the Asian session on concern about the impact of the Covid-19 pandemic on the global economy didn’t materialise as the markets opened.
U.S. stock index futures rallied overnight during the Asian session as President Trump unveiled his plan for reopening the economy and on speculation that Gilead’s Remdisivir drug is effective against Covid-19. The company didn’t confirm the reports.
The pace for the gradual opening of the economy in the U.S. will be set by state governors, who have the authority to implement the necessary measures. The news was interpreted by traders as a positive sign that lockdowns may end soon. There is speculation that some states may begin relaxing social distancing measures as early as May 1.
Economic data continued to be disappointing as China reported a Q1 GDP contraction of 6.8%. Chinese retail sales declined by 20.5% year-on-year, while coronavirus deaths from Wuhan were revised higher by 1,290.
In early U.S. trading, the Dow Jones Industrial Average, also known as US30, was flat, while the tech-heavy Nasdaq slid into negative territory.
Gold’s Safe-Haven Status Questioned
After the third rejection of an attempted break above the $1,700 level, gold dropped more than 2% in early trading. Prices are hovering near the $1,685 level. A sustained break lower could open a move toward the $1,650 and $1,600 levels in the coming sessions.
The yellow metal has traditionally performed well at times of high inflation, which is in direct contrast with the current environment of deflationary fears stemming from the coronavirus outbreak.
The premium, which physical gold dealers demand from their clients, is between $200 and $500 over “paper” gold market prices. This market distortion is a result of several smelters and mints closing their doors due to the coronavirus outbreak.
USD Under Pressure
Some traders expressed fears that social distancing rules in the U.S. could be eased too early. Meanwhile, German health minister Jens Spahn said that the outbreak has become manageable, signaling the prospect for a quicker return to normality in Europe’s largest economy than previously thought.
Meanwhile, French President Emmanuel Macron has been vocal about the need for unity across the single currency area, and repeatedly called for joint fiscal measures. The euro is trading 0.4% higher against the U.S. currency, while the AUD and the NZD both staged a significant rebound against the greenback, rallying 0.5% and 1%, respectively.
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