Gold futures rallied to settle at their highest level in seven-and-a-half years on Thursday, getting a boost as the U.S. dollar declined on the back of the Federal Reserve’s new lending plans which aim to support the hit to the economy from the coronavirus pandemic.
The Federal Reserve on Thursday set up new loan programs and bolstered existing ones in an effort to provide $2.3 trillion to boost the economy.
The “take away for gold is extreme bullish,” said Jeff Wright, executive vice president of GoldMining Inc. “This will lead over long term to a much weaker U.S. dollar.”
The “goal is to reopen economy quickly, but the price will be a long-term weak U.S. dollar, which is good for gold as well,” Wright told MarketWatch.
June gold on Comex /zigman2/quotes/210036801/delayed GCM20 +1.07% rose $68.50, or 4.1%, to settle at $1,752.80 an ounce in Thursday dealings after trading as high as $1,754.50. It marked the highest most-active contract settlement since October 2012 according to FactSet data. For the holiday-shortened week, the precious commodity rose roughly 7%.
May silver gained 84.8 cents, or 5.6%, at $16.053 an ounce. For the week, the white metal gained about 9.6%.
Regular trading on Comex will effectively be closed on Friday due to Good Friday holiday.
The Fed is trying to “provide as much relief and stability as we can” during this period where Americans are staying at home to stop the spread of the pandemic, said Fed Chairman Jerome Powell in a statement Thursday.
Data on U.S. jobless claims revealed a climb, up 6.6 million in the first week of April—bringing total job losses in less than a month to 16.8 million.
Even before the pandemic panic, “an economic, financial and monetary crisis was inevitable anyway and the pandemic is accelerating and exacerbating this inevitable crisis,” said Mark O’Byrne, research director at GoldCore. “Gold is outperforming other assets and has delivered a 12% dollar return in 2020 year to date, and that outperformance will continue in the coming months and years.”
“$5,000 gold is quite possible in the next year or two,” O’Byrne told MarketWatch.
Against that backdrop, the ICE U.S. Dollar Index /zigman2/quotes/210598269/delayed DXY -0.09% a gauge of the dollar against a basket of six major rivals, was down 0.6% at 99.52. A weaker dollar can provide support for gold, which is traded in the currency.
“The market is flooded with cash from central banks around the world which is inflating gold prices at this highly uncertain time,” wrote Craig Erlam, senior market analyst at Oanda, in a daily research report.
Gold prices gained on Wednesday after minutes from the Federal Reserve’s March 3 and March 15 meetings showed that Fed staff’s worst-case scenario was that an economic recovery wouldn’t take hold until next year.
Among other metals traded on Comex, May copper ended little changed, down 0.02% at $2.2595 a pound. July platinum /zigman2/quotes/211798678/delayed PLN20 +0.58% rose 2% to $748.60 an ounce, but June palladium /zigman2/quotes/210240810/delayed PAM20 -0.08% added 0.7% to $2,110 an ounce.