Gold Futures Settle Higher On Safe-Haven Demand

Gold prices climbed on Thursday on safe-haven demand as fears about a second wave of coronavirus infections and the Federal Reserve’s weak outlook for the U.S. economy knocked the wind out of riskier assets such as equities.

Fed Chair Jerome Powell said on Wednesday that millions of Americans may never get their jobs back and that Congress will probably need to extend additional aid as unemployment remains at historic highs.

The lack of Fed confidence in the U.S. economic recovery weighed on equities, while the dollar rose from three-month lows amid U.S.-China tensions and fears of a hard Brexit.

Meanwhile, concerns are growing about a second wave of the Covid-19 virus after Texas on Wednesday reported 2,504 new coronavirus cases, the highest one-day total since the pandemic emerged.

The dollar index rose to 96.68 this afternoon, gaining from Wednesday’s close of 95.96.

Gold futures for August ended up $19.10 or about 1.1% at $1,739.80 an ounce, the highest settlement since June 1.

Silver futures for July ended higher by $0.093 or about 0.5% at $17.889 an ounce, while copper futures for July closed lower by $0.0700 or 2.6% at $2.5865 pound.

The U.S. Federal Reserve, which left its key reference rates at zero to 0.25% on Wednesday, indicated that rates would stay near zero through 2022. The Fed also projected U.S. real GDP will nosedive by 6.5% in 2020, as the ongoing public health crisis weighs heavily on economic activity.

The central bank said the economy will rebound in 2021 following a sharp contraction this year due to the coronavirus pandemic.

The accompanying statement also reiterated that the Fed expects to maintain this target range until it is confident that the economy has weathered recent events and is on track to achieve its maximum employment and price stability goals.

In his post-meeting press conference, Fed Chair Jerome Powell said the central bank is “not even thinking about raising rates.” He also told reporters that it “remains an open question” whether targeting interest rates along the yield curve would usefully complement the Fed’s main tools.

With businesses reopening following the coronavirus lockdown, the Labor Department released a report on Thursday showing a continued decrease in first-time claims for U.S. unemployment benefits in the week ended June 6th.

In economic news today, a report from the Labor Department said initial jobless claims tumbled to 1.542 million last week, a decrease of 355,000 from the previous week’s revised level of 1.897 million. Economists had expected jobless claims to slump to 1.550 million from the 1.877 million originally reported for the previous week.

Jobless claims declined for the tenth straight week after reaching a record high of 6.867 million in the week ended March 28th.

Another report from the Labor Department said the producer price index for final demand climbed by 0.4% in May after tumbling by 1.3% in April. Economists had expected the index to inch up by just 0.1%.

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