Gold on track for biggest weekly gain since June as downbeat economic data fuel haven demand

Gold futures rallied on Friday, headed for the sharpest weekly gain in eight months, as downbeat U.S. economic data and steadily sliding government bonds rates offered fresh support to the haven asset that is on pace for a seventh straight session gain.

Goldman Sachs in a recent research note wrote that bullion could top $1,850 an ounce in the near term if the outbreak of COVID-19, the infectious disease that reportedly originated in Wuhan, China, can’t be contained by the second quarter.

The analysts say the illness, which has claimed more than 2,200 lives and sickened 76,767 people, according to the World Health Organization’s latest tally, has more room to run “depending on the magnitude of the monetary policy response.”

Gold for April delivery GCJ20, +1.62% on Comex added $30.90, or 1.9%, to $1,651.0 an ounce on Comex. The metal is on pace for a weekly gain of more than 4%, which would mark the sharpest weekly rally for a most-active contract since the week ended June 21, according to FactSet data.

The powerful rally for the precious metal, which has sparked renewed interest by market analysts, comes as the 30-year bond yieldTMUBMUSD30Y, -3.26% slipped 7.6 basis points to 1.894%, falling below its previous all-time low of 1.95%. Precious metals don’t offer a coupon so falling yields can underpin gains for the hard commodity.

Gold is now in the “fear of missing out,” stage, and “position traders are chasing gold equities and physical gold,” said Jeff Wright, executive vice president of GoldMining Inc.

Investors have been worried that the disease could hamstring Asian economies, considered linchpins for industries like semiconductors and automobiles, and fuel a global economic slowdown.

Data released Friday showed that business in the U.S. contracted in February for the first time in four years due to disruptions caused by the coronavirus and growing angst over the outcome of the 2020 presidential election. The index covering the large service side of the economy sank 4 points to 49.4, IHS Markit said Friday.

Federal Reserve members have been sanguine about the outlook for the domestic economy thus far. St. Louis Fed President James Bullard said Friday in an interview on CNBC that there is a “high probability” the COVID-19 outbreak will be a temporary shock, while Atlanta Fed President Raphael Bostic on CNBC said he expected U.S. gross domestic product to remain healthy.

In other metals trading Friday, March silver SIH20, +1.15% rose 23.1 cents, or 1.3%, to $18.55 an ounce, with a weekly gain of 4.6% in sight, which would mark its sharpest weekly rise since August.

March copper added 0.7% to $2.606 a pound, on track for a weekly rise of nearly 0.3%. April platinum PLJ20, +0.33% added 0.2% to $980.40 an ounce, poised for a weekly rise of more than 1%, while March palladium PAH20, +0.52% climbed 0.5% to $2,596.90 an ounce, ready to notch another record finish and trading up by nearly 12% for the week.

Source: Read Full Article