What’s happening: Gold futures surged to their highest level in more than seven years on Thursday, following the announcement of a new lending plan by the US Federal Reserve.
What happened: The precious metal settled at its highest since October 2012, with investors looking for some cover amid renewed fears of a slowdown in global economic growth.
Investors scurried for safe-haven assets as the US economy reeled under the coronavirus pandemic. The latest jobless claims data and a declining US dollar due to the Fed’s new lending plan to support the economy drove the demand for the precious metal, sending gold futures higher by as much as 4.2%. Gold futures have gained 7% this week.
Why it matters: The Federal Reserve announced additional financial aid of $2.3 trillion to provide support to the crumbling US economy as coronavirus continues to spread. The latest financial aid comes in the form of a new loan plan and additions to the current ones.
Fears for the US economy were fuelled by the latest jobless claims report, which hit yet another record high in the first week of April. Jobless claimed surged 6.6 million to bring total job losses to 16.8 million in less than one month.
The news exerted pressure on the greenback, driving the ICE US Dollar Index down. The index, which is a measure of the dollar’s performance versus a basket of six major currencies, fell 0.6% to 99.52 on Thursday. A weaker greenback supported demand for gold.
June gold climbed 4.2% to settle at $1,752.80 an ounce on the Comex on Thursday, after reaching as high as $1,754.50 during the trading day. For the week, the precious metal has gained around 7%. Gold-backed ETFs for March added 151 tonnes, resulting in a net inflow of $8.1 billion.
May silver jumped 5.6% to $16.053 an ounce, with the metal gaining around 9.6% for the week. May copper slipped 0.02% to $2.2595 a pound, while July platinum gained 2% to $748.60 an ounce.
What to watch: The US EIA (Energy Information Administration) is scheduled to release its weekly petroleum supply report today. Any unexpected rise in supply will exert further pressure on oil prices. Announcements by the OPEC to lower output may support oil prices.