Gold, silver race higher on fears of second virus wave

[NEW YORK] Gold jumped toward its peak in April, when prices hit the highest since 2012, after bleak US government data underscored how hard coronavirus-related shutdowns have hit the world's largest economy.

Futures posted the highest close to a week since October 2012 after US factory production plummeted in April by the most in records back to 1919, and a gauge of US retail sales plunged through the record set just a month earlier.

"Everybody must have realised it, but it's just more evidence that the reality is this is a pretty bleak economic picture right now," Phil Streible, chief market strategist for Blue Line Futures, said by phone. "People are continuing to pile into gold because that weak economic picture is going to continue to drive interest rates lower."

Gold futures for June delivery settled 0.9 per cent higher at US$1,756.30 an ounce as at 1.31pm on the Comex in New York, after climbing as much as 1.2 per cent. Spot prices topped their 52-week high, heading for the highest close since November 2012.

Silver also got a stronger bid, rallying to the highest in over two months. The two precious metals have been lifted after US Federal Reserve chairman Jerome Powell warned earlier this week that the pandemic will take a heavy toll on the economy. Fears intensified on gloomy American unemployment data Thursday, and as President Donald Trump said he doesn't want to talk to his Chinese counterpart right now.

Nations that enjoyed success quelling the virus, including South Korea and China, now face a rising number of infections. In the US, Texas saw its deadliest day and its biggest jump in new cases since the start of the outbreak. That comes two weeks after controversial moves to reopen the state's economy.

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"There are fears over everything from political leadership through the health outlook overall and associated economic financial and political risk," said Rhona O'Connell, head of market analysis for EMEA and Asia at INTL FCStone. Prices are having a long-awaited breakout moment as market anxiety mounts, she said.

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