International spot gold traded at $1,731.00 an ounce in early Asian trading on Friday (May 15). Gold, which soared to a high of $1,766.10 an ounce in the previous session, continued to trade in consolidation near its highs.
The last session of international spot gold sub-market early trading at 1714.86 dollars/ounce, the highest to 1736.10 dollars/ounce, the lowest to 1709.55 dollars/ounce, closed at 1730.18 dollars/ounce, up 14.68 dollars or 0.86%.
COMEX gold for June delivery, meanwhile, closed up $24.50, or 1.4 percent, at $1,740.90 an ounce.
Separately, Gold holdings in the SPDR Gold Trust, the world’s largest Gold exchange-traded fund and a barometer of market sentiment, jumped to a seven-year high of 1, 092.14 tonnes on Wednesday.
Gold climbed to a three-week high in the latest session, driven by safe-haven demand as investors sold riskier assets on fears of a prolonged period of economic weakness and renewed trade tensions between China and the United States.
Edward Moya, senior market analyst at brokerage OANDA in Toronto, said some investors appear to be turning bearish on U.S. stocks as recent U.S. economic data has been so dismal, all of which has supported safe-haven demand. Gold has been spiraling higher in the past few weeks, but now the macroeconomic backdrop also looks set to support higher prices in the short term.
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.
Separately, new claims for U.S. jobless benefits fell for a sixth straight week to 3.176 million, down from 3.176 million in the previous week, but remained surprisingly high. Global stocks also fell for a third straight session as disappointing employment data and central bank signals that further government stimulus may be needed added to investor concerns about the global economic recovery.
Initial claims for state unemployment benefits hit nearly 3 million last week
New claims for state unemployment benefits totaled nearly 3 million in the most recent reporting period, labor department data showed on Thursday. While that number remained high, it was the sixth straight week of declines.
Initial claims for state unemployment benefits reached 2.981 million last week, bringing the total since the coronavirus crisis to nearly 36.5 million, the largest job loss in U.S. history. The figure released last week was revised to 3.176 million, an increase of 7,000 from the initial estimate released last week.
While the number of unemployed has fallen since its peak on March 28, unemployment remains widespread in the United States, even as states continue to slowly return to work after the economic shutdown.
The labor department reported 20.5 million nonfarm jobs were lost in April and the unemployment rate hit 14.7 percent, both the highest levels since world war ii.
According to the latest figures, those who lost their jobs have still not been put back to work, and the freeze, which was supposed to last only a few weeks, has now been extended by nearly two months. Initial claims for state unemployment benefits rose another 2.98 million last week.
The number of people continuing to claim unemployment benefits rose by 456,000 to a record 22.83 million after the previous week’s total was revised down to 22.38 million.
New claims for unemployment benefits have exceeded 36m since early march, reflecting a sharp decline in the Labour force. Economists are looking at the continuing claims data to see how many workers are returning to work as a result of the states’ reopening and wage protection programs (PPP).
Daine Swonk, grant Thornton’s chief economist, said: “this may not be a wage-protection scheme. We’ve also seen some manufacturing plants open. Even parts of California are opening up.”
Initial jobless claims are likely to improve next week, with the decline likely to be much steeper, Swonk said, but questions remain about whether large Numbers of workers will return to work in the near term.
At 20:30 Beijing time on Friday, the us is expected to report an 11 percent monthly decline in retail sales for April, compared with an 8.7 percent drop in the previous month. Us retail sales figures are known as “scary Numbers” and often cause wild market swings.
“People’s expectations for the data to go down are still pretty solid,” said Ryan McKay, commodities strategist at TD Securities.
Golden aftermarket outlook
Goldman sachs continued to reiterate its bullish stance on gold on Thursday, with Jeffrey Currie, the firm’s global head of commodities, saying in an interview that gold was his favorite commodity to trade. “There are a lot of reasons to still own gold,” he said in an interview. Most importantly, you still see the devaluing effect of all the stimulus, “he said.
Ole Hansen, an analyst at saxo bank, said hedge funds pared their bullish bets to an 11-month low, even as ETF managers with a longer-term view continued to accumulate gold. A sustained rally could force the hedge funds’ money back into the gold market. If so, that could be the next driver of higher gold prices.
Florian Grummes, managing director of Midas Touch Consulting, said investors could expect gold prices to rise several times their current value and silver to jump into triple digits in the long run, but they should not expect precious metals to break through in the short term.
Peter Hug, global head of trading at Kitco Metals, said investors must bear in mind that the underlying causes of this recession are different from the 2008 financial crisis and should price gold accordingly. Very optimistic about the medium – to long-term trend of precious metals. “You won’t be selling gold anytime soon, because you need gold in your portfolio, given the risks to the stock market and the economy.”
“Gold bulls remain optimistic about the outlook for gold as many investors believe the current environment is similar to or worse than the 2007-08 financial crisis,” Hussein Sayed, chief market strategist at FXTM, wrote in a daily research note. The crisis shook global markets. If something similar were to happen again, the price could reach $3,500 or even $4,000 in the next three years. While history may not repeat itself, there are too many factors driving gold higher.”
Andrew Hecht, founder of the Hecht Commodity Report, said the unprecedented monetary and fiscal stimulus would eventually push gold prices to record highs in the long run. I continue to see parallels between gold prices during the 2008 financial crisis and current market conditions, as the pandemic devastated the global economy.
In 2008, the federal reserve and all central Banks around the world provided the massive monetary stimulus to the market, which led to a rally in commodities as a whole, with gold and silver performing particularly well, Hecht said. I will never confront the actions of the world’s Central Banks. Silver has upside potential, with the key technical level to watch at $21. If I wanted to buy the dips now, I would buy silver because I think that’s the biggest percentage gain, but for the long term, gold is what I want.