Jobless Claims Shock, Stimulus Kick Gold Higher

By Barani Krishnan 

Investing.com - The record $2 trillion U.S. stimulus package itself would have been enough to make gold bugs glow. The all-time high in unemployment claims that followed, however, made being long on the yellow metal even sunnier.

Bullion and futures of gold advanced in the $1,600 zone on Thursday in response to the historic fiscal rescue passed by the U.S. Senate to provide a jolt to an economy reeling from the coronavirus pandemic.

The Labor Department, meanwhile, reported that a record 3.28 million Americans filed for first-time unemployment benefits — a figure higher than even Chicago's population of 2.7 million. That's a signal that mending the labor market could take a lot longer than anything afforded by the stimulus, boosting the prospects of safe havens such as gold.

“Gold prices are surging as the next phase of trading coronavirus pandemic will focus on the data and how bad it will get,” said Ed Moya, senior market analyst at online trading platform OANDA.

Gold futures for April delivery on New York’s COMEX settled up $17.80, or 1%, at $1,651.20. April gold raced to as high as $1,699.15 on Tuesday, priming it for a return to $1,700 levels.

Spot gold, which tracks live trades in bullion, was up $14.50, or 0.9%, at $1,631.63 by 2:40 PM ET (18:40 GMT).

While the official price tag on the Senate-approved stimulus is $2 trillion, White House Economic Adviser Larry Kudlow has suggested that the final rescue bill for the United States could be as high as $6 trillion. Separately, the Federal Reserve is standing by with more money to support financial markets through bond buying and direct loans to companies, adding to gold’s prospects.

“Extraordinary steps by the Fed this week, including uncapping the size of asset purchases and buying investment grade bonds, should push real interest rates deeper into negative territory and in turn support demand for real assets like gold,” UBS commodities analyst Giovanni Staunovo said in a note.