By Barani Krishnan
Investing.com - Gold continued its swings in and out of the $1,700 berth after U.S. lawmakers approved a new $500 billion coronavirus stimulus package.
Gold also rose for another reason: the safe-haven crowd latched on again to Wall Street, a one-time contrarian trade that has now become trendsetter for the yellow metal.
Gold futures for June delivery on New York’s COMEX settled up $50.50, or 3%, at $1,738.30 per ounce.
Spot gold, which tracks live trades in bullion, was up $28.80, or 1.7%, at $1,714.92 by 4:30 PM ET (20:30 GMT).
Analysts cited a bunch of factors that could have contributed to Wednesday’s run-up in gold, such as fear of a more-severe-than-thought global recession from the Covid-19 pandemic, this week’s collapse in oil prices that could continue to weigh on key parts of the U.S. economy and credit markets and stimulus measures announced by Mexico, Singapore and South Korea.
Yet, the single biggest driver seemed to be the Dow, which rose 2%.
While gold and stocks often move decisively in opposite directions during normal times, the coronavirus pandemic has often led to a slump in gold when stocks tumble as investors had to liquidate their holdings in the precious metals to cover dents in their equities portfolio.
Aside from the additional $500 billion coronavirus package approved by lawmakers to further support the economy, the rally on Wall Street coincided with plans by some U.S. states, including Georgia, South Carolina, Tennessee and Texas, to lift lockdown measures imposed during the Covid-19 pandemic.
“Gold is now back comfortably above the $1700 level and still has room for another attempt at $1800 later this week,” said Edward Moya, analyst at online trading platform OANDA.
TD Securities concurred with that view.
“All suggest that the outlook for gold prices remains particularly strong,” the Canadian bank-backed brokerage said in a note. “We do not expect a significant impact on price action from CTAs with very minimal flow estimated.”