By Deepta Bolaky
The virus continues to spread across the world, with more than 17 million confirmed cases of coronavirus and 670, 000 deaths. Many countries have seen a surge in the number of infections over the months. As the month comes to an end, we note that countries that have initially successfully controlled the outbreak are now experiencing a rise of cases again. Pfizer, BioNTech, Moderna and AstraZeneca have all issued positive vaccine updates that have increased expectations of a potential vaccine in early 2021. The US remains among the worst-hit countries, but now Europe is under the radar over fears of a second rise in cases.
As virus cases continue to surge, investors fret of a deeper recession. Earlier this week, the preliminary GDP figures show that the US is poised to shrink by a 32.9% – the deepest decline in decades. The pandemic continues to wreak havoc across the globe and the outlook for the third quarter remains murky.
Gold has been on an unstoppable rally recently as investors are hedging with safe-haven assets given the ongoing uncertainty and geopolitical tensions. The fears of a second wave and the prospects of rolling back reopening measures are overshadowing the recovery outlook. The path of the global economy remains dependent on the course of the virus. Towards the end of the month, the uncertainty around the US next stimulus package has also pushed the precious metal higher. The XAUUSD pair broke the record high seen during September 2011 and rose to an all-time intraday high at $1,981.
Towards the end of the month, the precious retreated from recent highs and suffered its first loss in ten sessions dragged by positive vaccine updates and a tech rally. As of writing, the pair is currently trading at around $1,967.
Where is the next target level? In the face of uncertainties, gold is gaining momentum due to a number of factors ranging from the global economic crisis, US election, stimulus packages, continued spread of the virus, geopolitical tensions between US and China, and a fragile rally in the stock market among others. Many big banks struggle to agree on the next level after the gold broke the $2,000 mark. The pace of the rally have moderated and gold may be subjected for a correction but the fundamentals remain bullish.
After a busy month on the earnings front, mega-cap tech-related firms like Alphabet, Amazon, Apple and Facebook stood out as they reported strong earnings report showing the resilience of the big tech companies.
Apple, Amazon and Alphabet reported their quarterly updates after the market close and triggered a tech rally in after-hours trading despite the risk-off sentiment in the global stock market.
Mark Zuckerberg stated that the tech industry is an “American Success Story”. Earlier this month, the combined value of four of the big tech giants exceeded Japan’s entire equity market.
For the month to date, US stocks are performing better than its European counterparts. On the reassurance that the intervention measures are not going to fizzle out anytime soon, investors have pushed global stocks higher. European bourses found support on the historic move made by the EU leaders on the agreement of the Recovery Package and European Budget and its initially successful containment of the virus.
The delay in the proposing the next round of stimulus package and the hesitation and concerns with proposed $1 trillion plan unveiled by the Senate Republicans this week are weighing on risk sentiment. As of writing, the new clusters of the virus in certain European countries are also weighing on European bourses which were rebounding quite well until recently.
The US dollar traded on the back foot as the safe-haven struggled to find support despite the current market and geopolitical jitters. The greenback faced the brunt of the mounting number of cases raging in the US in comparison with other major economies.
The US dollar Index which measures the performance of the greenback against a basket of currencies fell from the 97 mark at the beginning of the month to a low of 92.50 as the month comes to an end. Earlier this month, Deutsche Bank USD Trade Weighted Index showed that the US dollar broke the nearly decade-long uptrend.
On the other side, the Euro benefitted from the unprecedented recovery package deal and budget agreed by the EU leaders to support their economy and the easing lockdown measures in European countries. Also, among major developed countries, daily activity gauges show that EU countries were recovering better post-coronavirus and were ahead of the US, UK and Canada.
The EURUSD pair rallied to a high of 1.19 – the highest level seen since 2018.
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