Futures & Commodities

Gold rises on safe-haven appeal but set for weekly drop

A one kilo Swiss gold bar and US dollars gold coins are pictured in Paris on February 20, 2020.
JOEL SAGET| AFP via Getty Images

Gold prices rose on Friday as safe-haven buying offset a rush for cash amid fears over the economic hit from the coronavirus, but bullion was headed for a second weekly drop as investors sold the metal to meet margin calls in other assets.

Spot gold gained 0.84% to $1,482.57 per ounce after a 1% fall in the previous session and was en route to post a near 3% decline for the week. U.S. gold futures climbed 0.34% to $1,484.70.

"It's definitely risk hedge buying. If only for a day ... what can you buy to hedge weekend risk? You can be in cash or precious metals, that's about it," said Jeffrey Halley, a senior market analyst at OANDA.

Asian shares sought a reprieve following gains on Wall Street, while the dollar crossed a three-year high as the epidemic drove a dash for cash.

The U.S. Federal Reserve opened the taps for central banks in nine new countries to access dollars in hopes of preventing the outbreak from causing a global economic rout.

Several countries rolled out measures to stem the economic damage, with the U.S. Senate unveiling a $1 trillion economic stimulus plan, while the Bank of England promised 200 billion pounds of bond purchases and cut its key interest rate to 0.1%.

While gold has been reacting to moves in financial markets and at times found support from stimulus measures, "it's a bumpy ride as liquidity and participation continue to fall by the wayside," said Stephen Innes, chief market strategist at AxiCorp, in a note.

"I'm not so sure this is so much a function of the market, or due to the fact that many gold traders are working at home."

The global economy is already in a recession as the hit to economic activity has become more widespread, a Reuters poll showed.

The number of Americans filing for unemployment benefits surged by the most since 2012 last week.

Among other precious metals, palladium rose 0.5% to $1,660.82 per ounce. Platinum jumped 4.6% to $613.54 but was set to post its biggest ever weekly fall. 

Platinum and palladium will remain turbulent in coming months after huge losses sparked by the spread of the coronavirus, before starting a tentative recovery with support from palladium's supply gap and platinum's correlation with gold, analysts said.

Silver gained 3.5% to $12.54, but was on track to post its second steepest weekly decline of about 15% since September 2011.