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Gold post biggest weekly gain since June as downbeat economic data fuel haven demand

  • Gold

21 Feb 2020

By Myra P. Saefong,

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

Prices for palladium, meanwhile, registered another record settlement, with March palladium PAH20, +0.29%  up 1.2% at $2,605.40 an ounce for the session, climbing 12.5% for the week.

Read: Why analysts urge caution on palladium, platinum and rhodium

Goldman Sachs in a recent research note wrote that gold prices 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, -0.18%  on Comex added $28.30, or nearly 1.8%, to settle at $1,648.80 an ounce on Comex. The metal saw a weekly gain of 3.9%, which marked the sharpest weekly rally for a most-active contract since the week ended June 21, according to FactSet data.

Read: Gold miner stocks stage broad rally, as gold prices extend run toward 7-year high

The powerful rally for the precious metal, which has sparked renewed interest by market analysts, comes as the 30-year bond yield TMUBMUSD30Y, +0.00%  slipped 6.4 basis points to 1.9066%, 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.

However, 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, -0.40%  rose 21.1 cents, or nearly 1.2%, to $18.53 an ounce, with a weekly gain of 4.5%, which was its sharpest weekly rise since August.

March copper added 0.8% to $2.608 a pound, for a weekly rise of 0.3%. April platinum PLJ20, +0.08%  shed 0.3% to $976.10 an ounce, for a weekly rise of nearly 0.8%.

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