Gold recovered from the 3% loss recorded last session as US employment data took a turn for the worse as jobless claims unexpectedly topped one million again, while the Federal Reserve minutes reiterated concerns over economic recovery.
Spot gold gained 0.8% to $1,946.03 per ounce by 12:30 p.m. EDT Thursday, while US gold futures fell 0.9% to $1,951.90 per ounce in New York.
The Fed’s July meeting minutes released on Wednesday afternoon revealed that policymakers expressed little support to cap bond yields, putting pressure on gold prices. At the same time, the committee also did not rule out a use of more monetary support financial conditions worsen.
“The Fed minutes reiterated the need for people to own gold, they were still concerned about the coronavirus and its impact on the economy, that shows they want to stay accommodative and help consumers stay afloat,” Michael Matousek, head trader at U.S. Global Investors, told Reuters.
An unexpected rise in US jobless claims and weaker equities were also helping gold, analysts said. However, with the dollar index at a near one-week high, it has capped gold’s gains by making the non-yielding bullion expensive for holders of other currencies.
“The main fundamentals behind gold have not changed. Stimulus is still coming in and it’s very pre-mature to say we’re recovering globally and should see higher rates and stronger dollar; we are many months away from that.”
Edward Meir, an analyst at ED&F Man Capital Markets
Central banks have rolled out massive stimulus and cut interest rates to near zero to combat the economic toll from the coronavirus crisis, prompting a near 30% gain through the year in gold, considered a hedge against inflation and currency debasement.
Meanwhile, some in the market are beginning to take caution with regards to the precious metal. In an earlier interview with Financial News, legendary investor and renowned gold bull Mark Mobius warned investors to steer clear of gold until its price drops.
“The safest investments are equities and precious metals such as gold. However, I would not advise buying gold or precious metals at this time until a price correction has taken place.”
Mark Mobius, Mobius Capital Partners LLP
Mobius’ comments represent a sharp contrast from his stance on gold earlier this year. In July, he advised that investors should continue buying gold even when the precious metal first started breaking to new highs.
(With files from Reuters)