Gold Rocketing Towards $1,900

Gold Rocketing Towards
$1,900 

The precious metal gained more than $20 to $1,840 on
Wednesday, before continuing its rocket ride towards the $1,860 handle during
Thursday’s early Asian trading session. Yesterday’s surge in gold price comes
amid the EU’s recovery stimulus agreement, which also sent the euro to its
6-months high.

EU Recovery Stimulus

The €750B stimulus package aims to support and speed
up economic recovery damaged by the COVID-19. As the EU transit from its
lockdown, the money will be available for both individuals and businesses,
where €390B in grants while €360 in loans. This will encourage  the EU’s economic activity and growth while
at the same time boosting inflationin the long run.

The safe-haven metal is widely used to hedge
inflation; thus, yesterday’s €750B from the EU and other stimulus and monetary
policy loosening from central banks globally gave the metal a boost in price as
investors dived into the market. Besides that, the risk of second virus
outbreak kept investors cautious with their optimism towards the global
economic recovery.

US-China trade war

Further supporting gold prices are other uncertainties
that had linger on to the market before the pandemic, the US-China trade war.
Relationship between the both worsened amid China’s legislation bill towards
Hong Kong and US pinning the blame on China and led US President Trump to look
away from the Phase 2 trade deal. Previously, Trump on social media stated that
the Phase 2 will not be considered.

From Hong Kong’s front, Trump signed a bill to impose
sanctions on China following their interference with Hong Kong’s autonomy (the
right of self-government). Another order ending Hong Kong’s preferential
treatment was also signed, which led to China’s vow to retaliate. The US also
banned citizens from China who are part of the Communist Party from entering
the country, further jeopardizing their relationship.

While gold remains unstoppable, the vaccine’s
discovery would be the risk-on driver for the market that could prevent the
gold from hitting $2,000.