Gold Off Last Week’s Rally

Gold Off Last Week's Rally

Gold off last week’s rally as investors continued to worry about the novel coronavirus and its impact on the global economy. The yellow metal is only slightly off last week which saw the biggest weekly rally since 2008.

The most-active June gold futures contract rose 11% last week to settle at $1,654.10 an ounce on Comex, though it declined 0.4% Friday. It’s heading for its best monthly performance since August. Currently, the June contract is at $1,645.50.

Last week’s gold rally was partly driven by a short squeeze as traders who had bet on market declines were forced to purchase gold to make good on maturing contracts, Bloomberg reported. Adding to their difficulties were disruptions in the supply chain for the precious metal caused by coronavirus-triggered lockdowns.

Spot palladium and spot platinum posted their biggest weekly gains on record because of a supply crunch in South Africa, a major producer of both autocatalysts, because of coronavirus-related lockdowns. Palladium soared 38% last week to $2,265.37 an ounce, while platinum climbed 21% to $744.77 an ounce.

May silver futures rose 17% last week to settle at $14.53 an ounce on Comex, though the metal declined 1% Friday.

Markets have been volatile throughout the month of March as the number of coronavirus cases climbed around the world and more countries — and U.S. cities and states — went into lockdown. The virus, known as COVID-19, has killed almost 34,000 people worldwide and sickened almost 723,000. About a fifth of the cases are now in the U.S., though just 7.2% of the deaths. The virus is a WHO-designated pandemic.

Gold has settled in a range of almost $200 over the past three weeks as competing factors influenced the market. Futures topped out at $1,675.70 on March 9 as gold renewed its role as a traditional hedge against geopolitical and economic uncertainty. But the metal wasn’t immune to the broader-market meltdown and tumbled to $1,477.90 on March 18 amid a rash of selling from profit takers and investors seeking cash to cover margin calls in other markets. Now the yellow metal is back above $1,600, in part because of the short squeeze.

And COVID-19 has dealt massive blows to global economies. Americans filing new applications for unemployment benefits surged to 3.28 million in the week ended March 21 amid displacements because of coronavirus-related shutdowns, according to Labor Department data. The figure dwarfed the previous record of 695,000 in 1982.

More information is due out this week, with the release of key industrial production data for the month of March from all major economies, which will provide an early indication of the virus’s impact. In the U.S., data on pending home sales comes out Monday, the Case-Shiller home price index, Chicago PMI and consumer confidence Tuesday, the ISM manufacturing index Wednesday, weekly jobless claims Thursday and the March unemployment report Friday.

 

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