The prices of gold inched higher on Wednesday, July 15, and remain above the psychological price level of $1,800 an ounce. The demand for the yellow metal was pushed up by fears over the surge of new COVID-19 infections and the rising tensions between the U.S. and China. Spot gold is trading at $1,812.29 per ounce, as of the time of writing.

New COVID-19 cases in the U.S. continue to rise, and many states were forced to temporarily cancel the reopening of their economies to contain the outbreak. The Federal Reserve has already warned that if the coronavirus is not controlled, the economic damage could worsen and the economic recovery from the pandemic could take much longer.

OANDA senior market analyst Jeffrey Halley commented that there is a strong demand for gold since investors are hedging coronavirus risks, particularly now that California has re-imposed lockdown. But, he also said that some investors are carefully monitoring the market because of comments from the Federal Reserve and the record amounts of bad debt provisioning by banks.

Adding to worries about the global economic recovery from the pandemic is the growing tension between the U.S. and China. U.S. President Donald Trump shut the door on Phase 2 trade negotiations with Beijing, and signed an executive order which ended America’s preferential treatment for Hong Kong. He said there will be no more special privileges, no special economic treatment, and no export of sensitive technologies to Hong Kong. It will now be treated the same as mainland China.

Trump also signed a legislative bill approved by the U.S. Congress to hold China accountable for its aggressive actions against the people of Hong Kong, and will penalize banks that do business with those who implemented the new security law. The Chinese Foreign Ministry responded and said no foreign county has the right to interfere in Hong Kong affairs because they are purely China’s internal affairs. It also threatened to impose retaliatory sanctions against the U.S. law that targets banks.

Meanwhile, investors are waiting for the policy decision of the Bank of Japan due to be released later. They are also waiting for the release of data on U.S. industrial production for June and the Federal Reserve’s Beige Book, which are also due.

In a related development, the holdings of SPDR Gold Trust, the largest gold-backed exchange-traded fund in the world, increased by 0.2% on July 15, to 1,206.89 tons. It is the highest level since April 2014, and reflects investors’ interest in gold.