International spot gold traded at $1,718.90 an ounce in early Asian trading on Thursday. Gold continued its volatile upward trend on the day, accelerating to a high of $1,719.20 an ounce, up about $5 since the session low, with bulls gaining momentum.
The last session of international spot gold sub-market opened at 1701.57 usd/oz in the morning, the highest to 1717.80 usd/oz, the lowest to 1697.90 usd/oz, closed at 1715.50 usd/oz, up 13.46 usd or 0.79%.
COMEX gold for June delivery, meanwhile, was up $9.60 at $1,716.40 an ounce.
Gold rose sharply from its lows on Wednesday, closing up $1,715.60 an ounce for the second straight day. Federal reserve chairman colin Powell said on Wednesday policymakers may have to use more weapons to pull the us out of the economic mire, but flatly rejected negative interest rates, saying the fed was not considering such a move. At the same time, he called on congress to provide more fiscal stimulus to avoid a prolonged downturn and promote a stronger recovery.
Powell said more stimulus measures will be taken if necessary to mitigate the economic impact of the covid-19 outbreak. Weak growth and stagnant incomes will continue for “an extended period,” promising that the fed will use more tools as needed and calling for more fiscal spending.
Gold rose as much as 0.9 per cent on the day, but gave up some of its gains after Mr Powell rejected the idea of negative interest rates as a stimulus tool.
‘the fed has many other options, so we could see more quantitative easing or a sustained policy that creates a positive environment for the gold market,’ said standard chartered analyst Suki Cooper. We expect global interest rates to remain low, with some countries experiencing negative rates, which will continue to provide a favourable environment for gold.
Meanwhile, the head of the international monetary fund said it was “very likely” that global growth forecasts would be cut further as the outbreak hit many economies harder than previously thought.
In terms of the global epidemic, Worldometers world real-time statistics show that as of 7:15 on May 14, Beijing time, the global total number of confirmed covid-19 cases reached 4422,593, and the total number of deaths reached 297,558. The United States has the highest number of confirmed covid-19 cases in the world, with 1428,185 cases and 85,047 deaths.
Overall, the market is still in a strong risk-off mood, so gold’s rise is not surprising, analysts said. Moreover, as the uncertainty of the second wave of covid-19 and the damage to the economy become more obvious, gold will be further sought after, which may lead to more room for gold price to rise.
The federal reserve has rebuffed calls for more fiscal action to rescue the economy from negative interest rates
Federal reserve chairman colin Powell said Wednesday policy makers may have to use more weapons to pull the U.S. out of the economic mire. The quagmire has cost at least 20m jobs and caused “untold suffering”.
While Mr. Powell didn’t specify what those measures would be or where they would come from, he said the coronavirus situation was different from past recessions in the United States, and the response would likely come more from congress than from the federal reserve.
“While the economic response is timely and proportionate, it may not be the last chapter given the highly uncertain path ahead and the significant downside risks,” Mr Powell said.
In a question and answer session that followed, he said the fed was not considering negative interest rates. “The committee’s view on negative rates really hasn’t changed. That’s not something we’re thinking about, “Powell said.
“The scale and speed of this recession is unprecedented in modern history, and it is worse than any recession since world war ii. We are seeing a serious decline in economic activity and employment, and the job gains of the last decade have disappeared, “Powell said.
Powell said the recovery depends in large part on a range of issues surrounding the virus, such as the availability and timing of treatments for the virus, testing or vaccines, whether the end of social distancing will trigger new outbreaks, and when consumer and business confidence will return.
“The answers to these questions will go a long way in determining the timing and pace of the recovery,” he said. Since the answer is not yet known, policy needs to be prepared for a range of possible outcomes.”
While Mr. Powell said the fed would continue to do what it could to stabilize the economy and financial markets, he also said the biggest future response would likely come from congress.
“Additional fiscal support may be costly, but if it helps avoid long-term economic damage and allows us to have a stronger recovery, it will be worth it.” That’s a trade-off that needs to be made by our elected representatives, who have the power to tax and spend.”
The dollar index hit a low of 99.60 at the start of Powell’s speech, but has since climbed to a new session high of 100.29. At the same time, spot gold rose to a high of $1,718 an ounce, but then fell back to a low of $1,702.50 an ounce.
Powell’s comments strengthened the market’s risk-averse tone, while gold overall remained buoyed.
Golden aftermarket outlook
Td securities expects gold to average $1,650 in the second quarter, $1,700 in the third quarter and $1,725 in the fourth quarter. It was $1,775 in the first quarter of 2021, $1,825 in the second quarter of 2021, $1,900 in the third quarter of 2021, and $2,000 in the fourth quarter of 2021.
Chris Gaffney, President of global markets at TIAA Bank in London, said gold’s rise was likely to continue, even if the economy rebounded quickly. It added: “as the economy will gradually rebound, the fundamentals underpinning gold will shift from a flight to safety over the pandemic to uncertainty over inflation and central bank indebtedness.”
‘overall, the gold market is treading water because there are strong drivers in both directions,’ said commerzbank analyst Eugen Weinberg. ‘on the one hand, we have very weak demand for physical gold, and on the other hand investors have very high demand for safety.’
Matthew Miller, an analyst at CFRA investment research, wrote in a note that he was bullish on gold and said the economic climate during the global covid-19 pandemic was probably the most favorable backdrop for gold, with higher prices boding well for producers.
Sean Lusk, co-head of commercial hedging at Walsh Trading, said gold has been moving in a narrow range and that pattern is forming a wedge structure that could lead to a breakout in the near future. The creation of a wedge shape can either widen the upside or the downside, and the wobble won’t last long, with a breakout in the next few weeks.