Expectations of jump in US jobless claims pushes gold down
US exchange operator CME announced a new gold futures contract to combat price volatility caused by the shutdown of gold supply routes
Bengaluru — Gold prices fell on Thursday as expectations of a surge in US jobless claims due to the coronavirus outbreak eclipsed a huge US stimulus package and kept alive a rush for cash among investors.
Spot gold fell 0.8% to $1,600.22/oz by 5.08am GMT, after falling 1% earlier in the session.
“There is no positive growth story here until business reopens, and that might see all these assets, that have been benefiting from the US Federal Reserve's [recent] stimulus announcement, including gold, come back down,” said DailyFx currency strategist Ilya Spivak.
“What we are looking at is a period of consolidation in gold and you are seeing this across a variety of assets.”
The US Senate on Wednesday overwhelmingly backed a $2-trillion bill aimed at helping unemployed workers and industries hurt by the coronavirus epidemic, as well as providing billions of dollars to buy urgently needed medical equipment. Asian stock markets nudged up, but gains were capped as investors were torn between relief at the package's passage through the Senate, and concern as to whether it will be enough to weather the coming storm.
The Fed announced on Monday it would buy bonds in unlimited numbers and backstop direct loans to companies, the latest in a series of policy steps taken over the past 10 days to calm markets and support the economy. Gold market participants, meanwhile, also kept a close watch on concerns about a supply squeeze crunch in the market, following a sharp divergence in London and New York prices as the coronavirus grounded planes and closed precious metals refineries.
US exchange operator CME Group on Tuesday announced a new gold futures contract to combat price volatility caused by the shutdown of gold supply routes, but traders and bankers said it would not immediately calm markets.
The steps taken by the CME to alleviate the squeeze in the physical market have also added to the retreat in gold prices, Phillip Futures analysts said in a note.
US gold futures fell 0.7% to $1,622.60/oz, retreating from a sharp rally to $1,699.30/oz in the previous session, but were still trading above the London spot metal contract. SPDR Gold Trust, the world's largest gold-backed exchange-traded fund, said its holdings rose 1.4% to 949.15 tonnes on Wednesday.
Among other precious metals, palladium fell 1.2% to $2,288.17/oz, having risen about 20% in the previous session, when it registered its best daily gain since 1997 as a lockdown in major producer SA worsened supply woes. Platinum slipped 1.5% to $726.77/oz, while silver was down 1% to $14.29/oz.