With the recent tensions between the U.S. and China, it looks like the U.S. dollar may have lost it’s popularity as “safe haven” currency. Traders have clamored over gold and other commodities due to the pessimistic outlook of the coronavirus situation.
As of this writing, gold has broken out the US$1,800 [AU$2,524] level and it looks like it may continue to soar for the next couple of days.
Coronavirus cases worldwide have hit over 16 million as per data from Johns Hopkins University.
Last week, a Chinese fugitive was taken into custody after accusations of visa fraud, CNN reports.
Tang Juan, a biology researcher, lied about her connection to the Chinese military in order to gain access into U.S. territory according to prosecutors’ allegations.
Additional reports from CNN also suggest investigators were able to uncover photos of her in the uniform of the Civilian Cadre of the Chinese People’s Liberation Army (PLA) and that she had been employed as a researcher at the Fourth Military Medical University (FMMU).
Republican Senator Marco Rubio of Florida took his frustrations over Twitter that the Houston consulate was tied with Chinese espionage.
China retaliated by closing the U.S. consulate in Chengdu, per AP News, and they have released a statement saying:
“The consulate has stood at the center of our relations with the people in Western China, including Tibet, for 35 years […] We are disappointed by the Chinese Communist Party’s decision and will strive to continue our outreach to the people in this important region through our other posts in China.”
In addition, Bloomberg has just further confirmed it with this video footage in Chengdu. It looks like the U.S. and China relations aren’t doing so well at the moment.
However, what interests the commodity traders this week is gold reigning supreme over other financial assets.
The U.S. Dollar Currency Index recently dropped below the 95 crucial support level and some traders over Twitter are eyeing on a make or break opportunity for this index.
Aside from the weakening U.S. Dollar index, Commonwealth Bank of Australia’s Vivek Dhar said the fall in U.S. 10-year real yields, which are sitting at 0.584%, has been the “most important driver” in a note circulated before gold hit new highs, as per CNBC.
Johan Jooste of The Global CIO Office told CNBC’s Street Signs Asia that the opportunity cost of holding gold is “virtually zero” due to the Treasury yields at their current low levels.
With gold making its rally this week, this may be a potential signal for other traders and investors that the other markets are showing signs of weakness.
However, some Asian markets try to be optimistic in their rallies with China’s industrial profits for June soared 11.5% year-on-year, according to the country’s National Bureau of Statistics.
Investors keep watch for the U.S. markets later as their stock futures are currently on the rise ahead of earnings reports and another coronavirus stimulus.
Featured image courtesy of Linda Hamilton/Pixabay
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