Gold gains 1% as Wall Street rally fizzles, dollar dips
· Gold rose more than 1% on Thursday as the dollar retreated and Wall Street paused its recent rally as dismal U.S. trade deficit data overshadowed slightly upbeat jobs numbers and optimism about an economic rebound.
· Spot gold rose 0.5% to $1,706.05 per ounce, recovering from a slide to a near one-month low of $1,688.89 in the last session. U.S. gold futures were up $22.6 at $1,727.4
· “Equity markets are still trading in the red and for gold market participants, that’s interpreted as a bout of risk-off and is leading to an increase in investment demand,” said Daniel Ghali, commodity strategist at TD Securities.
· After a strong rally on Wednesday, U.S. stocks opened lower despite U.S. weekly jobless claims dipping below 2 million for the first time since mid-March.
· Re-igniting worries about an economic slowdown, the U.S. trade deficit surged in April as the COVID-19 pandemic upended the global flow of goods and services, pushing exports to a 10-year low.
· The dollar also held near its lowest in about three months, making gold cheaper for holders of other currencies.
While gold has shown it can rally in a risk-on environment as well, “an equity market correction could also weigh on gold in the near term should liquidity needs materialise again,” Standard Chartered analyst Suki Cooper said in a note, forecasting prices to average $1,700 in the third quarter.
· Earlier in the day, the European Central Bank beefed up its bond-buying programme to support the euro zone economy, briefly boosting equities.
· “Long term picture for gold remains quite good,” Commerzbank analyst Eugen Weinberg said, adding exchange-traded fund demand is “very strong.”
· Holdings in the SPDR Gold Trust ETF rose to 1,133.37 tonnes on Wednesday, the highest since April 2013.
· Elsewhere, palladium fell 2.6% to $1,899.33 after dipping to a near three-week low of $1,815.66 earlier, while platinum rose 0.4% to $829.48. Silver remained unchanged at $17.67.
Reference: Reuters
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