Gold Falls As China COVID Fears Boost Dollar

Gold prices decreased on Monday as safe-haven demand caused by protests in numerous Chinese cities over the country’s stringent COVID-19 regulations caused the dollar to rise. These protests sparked the demand for safe-haven assets, which caused the dollar to appreciate.

As of 05:55 GMT, spot prices for gold were lower by 0.4%, coming in at $1,748.84 per ounce. Gold futures in the United States were down 0.3% to $1,749.60 per ounce.

The index for the dollar rose by 0.4%, making purchases of bullion priced in dollars more expensive for customers using currencies other than the dollar.

“Gold prices have been closely following the moves of the U.S. dollar, and greater worry from the growing instability in China looks to be underpinning the dollar this morning,” said IG market strategist Yeap Jun Rong. “Gold prices have been monitoring the U.S. dollar’s moves closely.”

Protests against China’s stringent COVID restrictions have flared up for a third day and spread to several cities in the wake of a deadly fire in the country’s far west. On Sunday night, hundreds of demonstrators and police officers clashed in Shanghai. The unrest comes in the wake of a fire that occurred in the country’s far west.

In the meantime, China reported on Monday a daily record number of new local coronavirus cases for the fifth consecutive day.

In light of the COVID situation in China, investors may be moving their money into defensive assets; however, according to Yeap, the recent strength of the dollar is currently overshadowing the safe-haven quality of gold.

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The upcoming speech by Federal Reserve Chair Jerome Powell on Wednesday regarding the economy and labor market in the United States is the next event that investors will be monitoring for hints on the future of monetary policy.

After the minutes of the previous policy meeting indicated a slower pace of hikes, the majority of market participants are pricing in a 50 basis point increase at the Fed’s meeting in December.

Holding on to the non-yielding metal incurs a greater opportunity cost as a result of rising interest rates.

The ADP National Employment report and the nonfarm payrolls figures that are set to be released by the United States Department of Labor later this week will also be analyzed for their potential impact on the Federal Reserve’s approach towards rate hikes.

According to a recent survey by technical analyst Wang Tao, spot gold might fall below its previous low of $1,727.50 per ounce, which occurred on November 23.

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Silver decreased in value by 2.2%, reaching $21.12, while platinum fell by 0.5%, reaching $975.88, and palladium fell by 0.2%, reaching $1,848.38.

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