Gold Rose As Safe Haven

Gold Rose As Safe Haven

Early Wednesday, gold rose as safe haven attributes attracted investors who fled to the yellow metal amid doubts about a potential vaccine and concerns about the global economy.

At the beginning of this week, investors pinned their hopes to a COVID-19 vaccine being developed by Moderna Inc., but subsequent reports have indicated that the euphoria that spurred the broader market may have been premature.

Meanwhile, Treasury Secretary Steven Mnuchin and Federal Reserve Chairman Jerome Powell told lawmakers Tuesday that the U.S. economy faces the possibility of permanent damage because of the lockdowns triggered by the coronavirus pandemic. They made a joint appearance before the Senate Banking Committee in which they also warned that the economy will get worse before it gets better and a full recovery won’t come until the crisis resolves itself.

Gold got some support after Powell said the Fed was “prepared to act further” to boost the economy. Indications of additional central-bank stimulus are typically seen as bullish for gold because the precious metal is used as a hedge against inflation.

Front-month gold futures rose 0.7% Tuesday to $1,745.60 an ounce on Comex. The most-active June gold futures contract is down 0.6% in the first two days of this week. The current June contract is at $1,752.40 and the DG spot is $1,752.80.

The Congressional Budget Office on Tuesday forecast that U.S. GDP will contract by 38% on an annualized basis, with 26 million more people unemployed that at the end of 2019.

Investors will look later Wednesday to the release of the minutes of the Federal Open Market Committee meeting in April for further economic signals. The Atlanta Fed’s Raphael Bostic and St. Louis Fed’s James Bullard are also scheduled to speak. U.S. data Tuesday showed that homebuilding starts tumbled in April.

The virus known as COVID-19 has killed more than 323,000 people worldwide and sickened 4.9 million. About 31% of the cases are in the U.S., though just 28% of the deaths. The U.S. has more cases than any other country.

July silver futures increased 2.5% Tuesday to settle at $17.90 an ounce on Comex, the highest settlement for a front-month contract since late February. The metal gained 4.9% in the first two days of the week. Currently, the July contract is at $17.915, while DG spot is $17.51.

Spot palladium advanced 1.9% Tuesday to settle at $2,113.00 an ounce, and it’s up 11% the first two days of this week. Spot platinum rose 1.4% Tuesday to $843.20 an ounce and is up 4.5% so far this week. The current DG spot price for platinum is $859.50, while palladium is $2,182.90

 

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