Gold futures head for highest level since mid-February 2013

Gold futures climbed Thursday morning, putting bullion on track to register a sixth straight gain as persistent worries about China’s coronavirus and a benign interest-rate environment provide a runway higher for the precious metal.

Gold has climbed in tandem with the U.S. dollar, something that doesn’t usually occur as a stronger greenback can weaken the appeal for dollar-pegged safe haven assets like gold.

“The fact gold gains come as stock markets are at, or around, record highs and the dollar index is also at near-three year highs is a little bizarre,” said Craig Erlam, senior market analyst at Oanda.

“The only feasible explanation for gold’s relentless march higher in that situation is the expectation that central banks are going to be forced to pump more liquidity into the system to manage the coronavirus situation,” he said in a daily update.

On Thursday, the China’s central bank cut its benchmark one-year loan prime rate by 10 basis points, and the five-year loan prime rate by 5 basis points. That followed its recent cut in the one-year medium-term lending rate.

The PBOC “sent another solid signal to investors to sway them that the bank is ready to support the economy through its monetary policies,” said Naeem Aslam, chief market analyst at AvaTrade.

Gold for April delivery GCJ20, +0.69% on Comex rose $9.80, or 0.6%, to $1,621.60, after a similar rise on Wednesday. Prices for the most-active contract are moving toward the highest levels since February 2013, according to FactSet data.

Read: Gold’s rise to near 7-year highs feeds talk of a climb to record prices of $2,000 and beyond

Although the daily rate of new cases of COVID-19, the infectious disease that reportedly originated in Wuhan, China, has gone down, investors have been keying in on the spread of coronavirus in other parts of the globe.

South Korea’s Yonhap News Agency said COVID-19 has claimed the nation’s its first life. The mayor of the South Korean city of Daegu urged its 2.5 million people to refrain from going outside, according to the Associated Press. Meanwhile, Japan reported the death of a pair of elderly passengers who had been on a ship that had quarantined because of the virus.

Analysts at Goldman Sachs estimate that the virus could eventually produce a correction to stock markets that have been trading as if the outbreak is contained.

March silver SIH20, +0.29% traded at $18.355 an ounce, up 4.4 cents, or 0.2%, in Thursday dealings, after climbing 0.9% in the previous session. Prices are holding at their highest level since January of this year.

Gains for metals come as fears about stress to the global economy from the virus has pushed the 10-year Treasury note yield TMUBMUSD10Y, -2.34% to 1.54%, while the ICE Dollar Index DXY, +0.00%, a gauge of the buck against a basket of a half-dozen currencies, was flat at 99.708, but trading around 0.6% higher week to date.

“Gold rise and US dollar index rising simultaneously is symbolic of safe haven demand. I had mentioned last week that global spread of coronavirus is the key. Coronavirus is infecting more and more people worldwide,” wrote Chintan Karnani, chief market analyst at Insignia Consultants, in a Thursday research report.

Precious metals pulled back slightly after U.S. economic data early Thursday. Initial jobless claims edged up by 4,000 to 210,000 in the seven days ended Feb. 15, the government said Thursday. The figures are seasonally adjusted. Economists polled by MarketWatch had forecast a 210,000 reading. A reading on manufacturing, meanwhile, the Philadelphia Fed Business Outlook Survey, produced a reading that was its highest in three years, outstripping analysts’ estimates.

Among other metals, March copper HGH20, -0.61% shed 0.6% to $2.5915 a pound. April platinum PLJ20, -1.14% shed 1.4% to $990.20 an ounce, but March palladium PAH20, +1.58% climbed by 1.4% to $2,608 an ounce, looking to notch another record settlement.

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