Gold rose for the first time in three sessions as U.S. Federal Reserve Chairman Jerome Powell again flagged risks to the economic recovery from the coronavirus pandemic.
Powell said significant uncertainty remains about the timing and strength of the recovery, with output and employment still far below pre-pandemic levels. His testimony, delivered via video-conference before the Senate Banking Committee on Tuesday, echoed views he gave last week after policy makers signaled rates would probably stay near zero.
Markets weighed Powell’s restrained sentiment along with concerns over new virus outbreaks in the U.S. and China against signs that parts of the economy are improving. Reports Tuesday showed U.S. retail sales climbed by the most ever in May, doubling the increase economists expected, while industrial output indicated a gradual recovery at factories. The dual sentiment may last for a month or two, according to Capital Economics.
“At the moment, you’ve captured the dichotomy in the market -- the risk-on, risk-off shifts,” Kieran Clancy, assistant commodities economist at Capital, said by phone Tuesday. “Clearly there are still risks on the horizon, and the market is still sensitive to those risks. It’s encouraging to see pickups in the data, but they’re coming from very low lows.”
Gold futures for August delivery rose 0.5% to settle at $1,736.50 an ounce at 1:30 p.m. on the Comex in New York. Silver also advanced on the Comex, along with platinum and palladium futures on the New York Mercantile Exchange.
Gold has traded in a narrow range in the past month, holding this year’s advance after the pandemic triggered an unprecedented wave of stimulus, bolstering the haven’s appeal. The Trump administration is preparing an almost $1 trillion infrastructure proposal as part of its push to spur the world’s largest economy, people familiar with the plan said.
“Every time the price falls, it seems that investors are seeing it as a buying opportunity more than time for further selling,” Carlo Alberto De Casa, chief analyst at ActivTrades, said in a note.
The Fed said Monday it will begin buying individual corporate bonds and expanded a lending program. The Bank of Japan has increased its lending support for struggling companies
Traders are also keeping an eye on new virus cases amid concerns about a second wave. Beijing is ramping up mass testing and raised its Covid-19 emergency response to the second-highest level after coronavirus infection cases resurged, according to China Central Television, citing a briefing by the city’s government.
Tensions between China and India also remain on investors’ radar, as well as events elsewhere in Asia. North Korean state media said the country is reviewing a plan to send troops into the demilitarized zone separating it from South Korea.