Gold benefits from bleak economic data

Bengaluru — Gold rose on Thursday as bleak economic data raised doubts about a recovery in the coronavirus-hit global economy even though some countries started to ease lockdown restrictions.

Spot gold climbed 0.3% to $1,690.19/oz by 3.44am GMT. US gold futures rose 0.4% to $1,694.50/oz.

“There is a lot of uncertainty, markets are still trying to gauge what will happen after we come out of lockdown,” said Stephen Innes, chief market strategist at financial services firm AxiCorp.

Gold is facing troubles to eke out decent gains, he said, adding that weak economic growth in most countries is supporting the dollar, denting the safe-haven metal’s appeal.

The dollar touched a more than one-week high against a basket of major currencies.

Gold declined more than 1% in the previous session on a firmer dollar and as some bullion refineries restarted production, easing global supply angst.

Highlighting the deepening effect of the coronavirus pandemic, US private employers laid off a record 20.236-million workers in April as the outbreak ravaged the world’s top economy.

The eurozone economy is set to contract by a record 7.7% in 2020 because of the pandemic, the European Commission forecast on Wednesday.

Investors now await the US weekly initial jobless claims data due later in the day for further direction, while keeping a close watch on developments surrounding US-China relations after President Donald Trump threatened new tariffs on Beijing.

“Gold in the short term could struggle, but the macro driver continues to point to a rally to record high territory [in dollar terms] later this year,” Edward Moya, a senior market analyst at broker Oanda, said in a note.

Economic activity is expected to have a much slower rebound this quarter and that should continue to support expectations that global monetary and fiscal stimulus efforts will only intensify, Moya added.

Central banks around the world have slashed interest rates over the past few months and unveiled unprecedented amounts of stimulus to help soften the blow to the world economy from the pandemic.

Gold, a safe investment during times of political and financial uncertainty, tends to benefit from widespread stimulus measures because it is widely viewed as a hedge against inflation and currency debasement.

Elsewhere, palladium gained 0.6% to $1,808.10/oz, platinum climbed 1.3% to $758.54 and silver edged up 0.3% to $14.96.

Reuters