Gold firm as mounting virus cases drive safe haven demand
Gold held firm on Thursday, after hitting a nearly eight-year high in the last session, as an upsurge in global coronavirus cases drove safe-haven buying.
Spot gold was up 0.3% at $1,765.94 per ounce, in sight of the peak of $1,779.06 reached on Wednesday, which was its highest since October 2012. U.S. gold futures rose 0.1% to $1,777.20.
“Gold prices continue to be supported by the increase in virus cases globally, raising doubts about the nature of the economic recovery in progress,” National Australia Bank economist John Sharma said.
Further lockdowns could also translate into the need for further economic support, and in turn low interest rates, he added.
Gold, which pays no interest, tends to benefit when interest rates fall as this reduces the opportunity cost of holding bullion.
Three U.S. states reported record increases in new cases on Wednesday. There has been a rise in infections elsewhere as well, including in Brazil, Latin America and India, which is also the world’s second biggest bullion consumer.
Asian stock markets fell in response to the resurging cases and an International Monetary Fund downgrade to economic projections, driving inflows into the alternate safe haven dollar. Gold recovered after some selling earlier in the Asian session, which was attributed to profit-taking from Wednesday’s strong rally.
“Any short-term correction is likely to be a slow grind lower, and not a rush for the exit doors,” said Jeffrey Halley, senior market analyst at OANDA.