Gold settles at a 2-month high as COVID’s rise rattles market

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Gold futures finished higher for a second session on Wednesday to mark their highest settlement in about two months.

A rise in cases of COVID-19 from more transmissible variants, especially in Asia and Latin America, threatens the world’s economic rebound from the pandemic, boosting the precious metal’s appeal as a investment haven.

“A growing sense of unease over the surging COVID-19 cases in Asia has hit risk sentiment and left investors on edge,” Lukman Otunuga, senior research analyst at FXTM, told MarketWatch. “With concerns likely to rise over how this may impact the world’s economic rebound from COVID-19, gold has the potential to push higher as risk-off makes a return.”

U.S. benchmark stock indexes traded higher on Wednesday, but were down for the week.

The concerns about the disease have also kept a rise in long-term bond yields at bay, with the 10-year Treasury note yield BX:TMUBMUSD10Y hanging around 1.56%. Subdued government debt yields can boost appetite for precious metals which don’t offer a coupon.

“Nominal yields have been on a downward trajectory since the beginning of the second quarter, as has the U.S. Dollar Index,” said Ross Norman, chief executive officer at Metals Daily. “Yields remain the key factor.” 

June gold GCM21, +0.07%   GC00, +0.07% gained $14.70, or 0.8%, to settle at $1,793.10 an ounce, after rising 0.4% on Tuesday.

On a technical level, gold has continued to rally “nicely” since taking out the downtrend line earlier this month that had been in place since the turn of the year, said David Russell, director of marketing at GoldCore.

Prices managed to hold above the 50-day moving average, he said, and looking ahead, “a strong close above the psychological $1,800 level could provide the momentum to move higher in the short term.”

Gold prices based on the most-active contracts settled Wednesday at their highest since Feb. 24, FactSet data show.

Precious metals are seen as a haven against uncertainty wrought by COVID. In India, over 250,000 new COVID infections and over 1,700 deaths were recorded in the past 24 hours, and the U.K. announced a travel ban on most visitors from the country this week, the Associated Press reported.

Outside of the U.S., India has the second-highest number of cases at 15.6 million, and is fourth globally by deaths at 182,553, although those numbers are likely understated.

Meanwhile, “demand from price sensitive Asia remains robust, with gold trading at a $10 premium in Shanghai over [local] London prices,” Ross told MarketWatch.

“Physical demand for coins and bars in Europe remains hot with premiums remaining elevated,” he said. And “perhaps most encouragingly,” the selling by institutions of the gold exchange-traded fund has abated while central bank demand has re-emerged.”

“In short, gold looks set for a successful retest of resistance at $1,800, but it remains to be seen how high it can go before the Asian demand peters out and the market flatlines again,” Ross said.

In other metals action, silver for May delivery SIK21, +0.08%  added 73 cents, or 2.8%, to finish at $26.57 an ounce, following a flat finish on Tuesday.

May copper HGK21, -0.19% also climbed by 1.6% to $4.28 a pound, with prices logging their highest finish since late February. July platinum PLN21, +0.21% tacked on 1.5% to $1,214.70 an ounce and June palladium PAM21, +0.27% settled at record $2,875.60 an ounce, up 4.3%.

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