Gold rose on Wednesday on bargain hunting, reversing course from a two-week low touched earlier, as investors latched on to the metal’s overall uptrend on the back of a low interest rate environment globally and lingering uncertainties.
Spot gold rose 0.3% to $1,557.80 per ounce by 2:25 EST. U.S. gold futures rose 0.4% to $1,562.30.
“Overall the trend is up, people want to be in gold right now just because of the central banks and what they’re doing in the long term. So, people are looking at the dip as an opportunity to accumulate more gold,” said Bob Haberkorn, senior market strategist at RJO Futures.
“People are coming into the market because of the lower interest rates and the loose policy of global central banks.”
Gold’s gains came despite a surge in U.S. stock markets, helped by strong monthly domestic private jobs data and reports of progress in developing a treatment to fight the fast-spreading coronavirus, as well as a stronger dollar.
The World Health Organization played down media reports of “breakthrough” drugs being discovered to treat people infected with the new virus, which has claimed about 500 lives in China and has spread to at least 20 other countries.
“When something like a virus comes out, or a big world fear, people shoot first and ask questions later. And when they shoot first, they grab gold. This is the buy the pullback mode,” said Michael Matousek, head trader at U.S. Global Investors.
Bullion had slipped to its lowest since Jan. 21 after a Chinese TV report said a research team at Zhejiang University had found an effective drug for the virus.
Investors now await the U.S. non-farm payrolls report on Friday to gauge the strength of the labor sector as the Federal Reserve kept interest rates unchanged in the last meeting, citing continued moderate economic growth and a “strong” job market.
Lower interest rates reduce the opportunity cost of holding non-yielding bullion.
On the technical side, a break below the $1,545 level could change the pull back into a consolidation while a rise above the $1,560 level could give way to further upside, Matousek said.
Among other precious metals, palladium was down 0.6% at $2,308 an ounce, having touched a near two-week peak earlier in the session.
Silver rose 0.3% to $17.60, while platinum gained 1.9% to $981.
© Copyright Thomson Reuters 2020.