The action in the gold market this morning is very impressive as prices are notably higher in the face of a lower virus infection count, fresh highs in the dollar and strength in global equities.

According to some press coverage there continues to be widespread "skepticism" on daily Chinese infection count readings while others are speculating that restarting production/manufacturing could result in breakouts beyond the quarantine areas.

Other supportive influences to start today are a 20th straight daily inflow into gold ETF holdings (+253,595 ounces) and a higher gold price close in Hong Kong. It is also likely that the April gold contracts rise above $1600 has created some technically based follow-through buying which in turn is likely to provide gold mining shares with lift once the stock market opens.

While not a primary bull force today, news that Kazakhstan, India, Ecuador, and the United Arab Emirates all increased central bank gold reserves last month adds classic fundamental credibility to the upside breakout. However, it should be noted that Turkey reduced its gold reserves while Chinese month-end holdings were unchanged.

While we are a little skeptical of the strong upward track because of a lack of definitive risk-off sentiment, the charts are persuasive and one certainly one can't discount the potential for headlines from the virus front suddenly rekindling significant anxiety.

On the other hand, one could make the argument that even with the infection rate coming under control each passing day, seeing 760 million Chinese remaining under quarantine is likely resulting in untold damage to the world's second-largest economy.

Given the ongoing threat against the Chinese government is expected to continue to implement historic stimulus efforts we have to wonder if inflation is finally finding a spark after decades of deflation!

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