EDITOR NOTES: Market sentiment fluctuates, always. But recent sentiment reflects a level of volatility that makes our economic situation difficult to decipher. For instance, are investors over-reacting to positive or negative news, based on the steep rallies and sell offs we’ve been seeing over the last few weeks? Despite the back and forth, one thing that has remained steady is the rise of gold and silver. Both metals have climbed to a five-week high, not only in response to the potential effects of central bank stimulus, but also as a hedge against the market’s inability to find direction--the latter point reflective of the global economy as a whole.
Gold prices headed higher Wednesday for a second session as investors remain mostly bullish about the prospects for the commodity against the backdrop of economies attempting to reopen from the COVID-19 pandemic.
The precious metal pulled back on Monday after a report from Moderna pointed to progress with an experimental vaccine for the novel strain of coronavirus that has infected nearly five million people globally. However, a report from STAT News on Tuesday raised some doubts about the prospective remedy for the viral outbreak, providing some lift for bullion.
“Speculators do blow things out of proportion the moment they get any news about a Coronavirus vaccine,” wrote Naeem Aslam, chief market analyst at AvaTrade, in a Wednesday research note. “But, when the optimism fades and reality becomes apparent, investors are left with no option but to hedge their bets,” he wrote.
Gold for June delivery on Comex GC00, +0.40% GCM20, +0.40% headed $9.20, or 0.5%, higher at $1,754.50, after closing 0.7% higher on Tuesday. Prices are nearing a level that would mark the metal’s highest close since mid April, according to FactSet data.
Meanwhile, July silver SIN20, +0.88% rose 7 cents, or 0.4%, to trade at $17.975 an ounce, following a 2.5% gain for gold’s sister metal on Tuesday.
Later in the day, an account of the Federal Reserve’s April 28-29 policy-setting meeting may provide more insights about the prospects for negative interest rates, which would be a boon for precious metals. The Fed’s meeting minutes will be released at 2 p.m. Eastern, a half-hour after metals trading on Comex settles.
Despite a rangebound trade, analysts believe that stimulus measures by central banks and governments across the globe to address the economic damage from the viral outbreak will help support prices for precious metals.
“We think gold’s performance of late reflects growing inherent strength,” wrote Joni Teves, strategist at UBS in a research report dated Tuesday. “Despite fluctuations in risk sentiment in the interim and significant policy easing largely expected, strategic diversification into gold remains warranted as real rates are likely to remain negative for a prolonged period,” the strategist wrote.
The analysts also pointed to growing appetite for silver.
“Silver ETF inflows have remained strong, suggesting retail interest is intact,” the UBS strategist wrote.
Originally posted on MarketWatch