Second wave of unrest in China - 19 new cases of coronavirus on the mainland

30.06.2020 05:47

China on Tuesday reported 19 new cases of coronavirus on the mainland as of the end of June 29, up from 12 a day earlier.
In General, China has successfully "smoothed the curve" in recent months, but this follows news that recent spikes in Beijing make the authorities fear a possible second wave.

While 19 new coronavirus infections sound like a small number compared to thousands of daily cases in the US or South America, some areas in Beijing have had travel restrictions and a massive wave of new tests for the virus has unfolded.

Until the recent spikes, no infections were reported in the Chinese capital for 57 days.

Market implications
However, close attention will be paid to events while the US is fighting infection in various States during its own second wave.
Markets are currently taking the news in stride, although the effects of a prolonged lockdown are likely to serve as a deterrent for investors who prefer to stay on the sidelines.

Gold is on the verge of a breakthrough
Analysts at TD Securities explained that while resurgent concerns that a second wave of Covid-19 could lead to another disinflationary lock could interrupt the inevitable breakout of the yellow metal, gold prices quickly offset concerns as real rates continued to fall.

Indeed, in the context of limited rates, the growth of long-term inflation expectations has become a powerful factor in raising gold prices.
The price action continues to strengthen our view that the role of gold is shifting from a safe haven asset towards an inflation hedging product.

Looking ahead, we also see sufficient opportunities to launch this driver, as the entire range of inflation break-even maturities is still priced below monetary policy goals. In this context, a reduction in real rates should inevitably support the price of gold to the level of $ 1,800 per ounce.

The world war II-era fiscal and Central stimulus, a change in the Central Bank's template that will include "symmetrical inflation targets" and unwinding globalization, also suggest that inflation-proofing assets may grow in popularity.

Possible associated demand for raw materials should also particularly support silver prices, which have maintained their historically high sensitivity due to their industrial component."

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