Gold futures headed higher Thursday with tightening supplies for the commodity, worries about the economic impact of the COVID-19 pandemic and rising tensions in the Middle East buoyed bullion lifting bullion prices for a second session.
The precious metal held on to its price gains after weekly labor-market data showed another 4.4 million people filed for unemployment benefits for the week ended April 18, bringing the total claims over the past month to 26 million since the coronavirus pandemic laid siege to the U.S. economy.
Separately, the IHS Market flash purchasing managers index for services in April fell to a record low at 27, while the manufacturing PMI weakened to 36.9, the lowest level in 11 years.
U.S. PMI was “horrible” and the services figure was “really bad, but no estimates were even worth making,” said Jeff Wright, executive vice president of GoldMining Inc.
Against that backdrop, gold has been able to secure gains even with the U.S. dollar “still holding strong,” he told MarketWatch. “I think global central banks have been quietly adding to holdings, retail has been flooding into the [SPDR Gold Trust exchange-traded fund] and with negotiations for further stimulus to recover economy coming, and now no concern on running deficits, gold is well positioned.”
Gold for June delivery GCM20, 0.75% on Comex was up $21, or 1.2%, at $1,759.30 an ounce, after rallying 3% Wednesday to settle at the highest price for a most-active contract since April 15, according to FactSet data.
May silver SIK20, 0.68%, meanwhile, picked up 26.5 cents, or 1.7%, to reach $15.60 an ounce, after the white metal advanced more than 3% on Wednesday.
For the week thus far, gold is on pace for a gain of around 3.5%, while silver futures are looking at a 2% return.
“In a direct opposite to the glut in the oil market, physical gold is seeing a shortage and so the price on the ‘nearest to deliver’ futures contract is experiencing sporadic $50+ surges in premiums relative to spot,” wrote Albert Edwards, global strategist at Société Générale, in a Thursday research note.
BofA Global Research notes that exchange-traded funds in metals have increased their holdings in silver, viewed as an industrial and precious metal, and gold, which has helped to lift both prices.
“In our view, noncommercial market participants have increased their exposure to silver for the same reason as market participants boosted gold holdings: concerns over ultraloose monetary policy and rising central bank balance sheets,” wrote analysts Clifton White and Peter Helles at BofA Global.
Meanwhile, President Donald Trump on Wednesday in a tweet “instructed the United States Navy to shoot down and destroy any and all Iranian gunboats if they harass our ships at sea,” a move that may also offer some lift to precious metals.
BofA Global predicts that recovering industrial production, coming after the worst of the viral outbreak subsides, could lead to a rise in silver to around $20 an ounce over the next 12 months, buttressed by government and central-bank stimulus efforts to lessen the economic impact of the disease.
“As such, a rebound of economic growth, supported by fiscal stimulus and central banks, could imply that silver will ultimately take off on two engines, having crashed to earth just now,” the analysts wrote.
Among other metals, May copper HGK20, 1.29% tacked on a 2.3 cents, or 1%, to trade at $2.313 a pound. July platinum PLN20, 4.39% rose 5.1% to $804.20 an ounce and June palladium PAM20, 6.67% jumped 5.3% to $1,991.60 an ounce, more than erasing a 0.8% decline a day ago.
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