Gold futures edged lower Wednesday, with possible progress on an experimental treatment for COVID-19 dulling heaven demand for the safe haven metal.
The news comes as investors awaited the outcome of a policy update from the Federal Reserve following a litany of emergency measures and programs intended to quell the devastating impacts of the COVID-19 pandemic.
Gold for June delivery GCM20, -0.52% on Comex fell $6.60, or 0.4%, at $1,715.60 an ounce, following losses in each of the past three sessions. July silver SIN20, +0.43%, which is now the most-active contract, picked up 12.7 cents, or 0.8%, to $15.455 an ounce, following a drop of less than 0.1% in the previous session.
Commodity experts have been watching for a treatment or a vaccine for the deadly contagion which could undercut appetite for havens and support hopes of mitigating the impact of the virus.
A report indicating that Gilead Sciences’s experimental treatment for the illness derived from the novel strain of coronavirus achieved some success in a government-run clinical trial evaluating remdesivir in certain COVID-19 patients.
Overall, it’s still a volatile time for gold, with trading in the metal “likened to an animated version of a game of tug of war,” said Jameel Ahmad, global head of currency, strategy and market research at FXTM. “It seems that buyers and sellers are each cancelling one another out.”
Gold futures, based on the June contract, trade about 1.1% lower for the week, but were up roughly 7.5% month to date.
“There is still a case that gold should be performing even stronger than it is already doing when taking a look at the horrifying economic data releases that are coming out,” Ahmad told MarketWatch.
On Wednesday, a first reading of the official scorecard of U.S. economic activity, gross domestic product, fell 4.8% in the first quarter on an annualized basis, highlighing the effects of the coronavirus pandemic so far.
Later in the day, the Fed will stay in focus as investors await its update at 2 p.m. ET, shortly after the gold futures settlement, followed by a virtual news conference hosted by Fed Chairman Jerome Powell to discuss the policy maker’s decisions.
The central bank has already exceeded its rescue effort in the 2008 financial crisis to soften the blow of the pandemic, pushing its balance sheet to a record $6.6 trillion as of last week’s count, and Powell is expected to reinforce the message the Fed stands ready to “aggressively” do more, if necessary.
Commodity traders might look for more guidance from the Federal Open Market Committee on the prospects for even more actions, including purchasing equities, and whether the central bank may venture into uncharted territory: taking its policy interest rate that presently stand at a range between 0% and 0.25% to subzero.
The actions thus far by the Fed, and other monetary-policy makers, including the European Central Bank which convenes on Thursday, has helped to bolster prices for precious metals.
“The volatility in gold prices is likely to spike when the Fed will declare its monetary policy decision and most of the bets are in favour of higher gold prices” wrote Naeem Aslam, chief market analyst at AvaTrade in a daily research note.
So far, however, gold has been mostly trading in a range, gold bulls are expecting it to possibly break out of that trend as data underlines the hard slog ahead for economies attempting to re-emerge from coronavirus-induced shutdowns.
Craig Erlam, senior market analyst at Oanda, said that “for now [gold] seems caught in two minds. $1,660 is the level to watch below and $1,750 above but the walls may be closing in,” he said.
Among other Comex metals, July copper HGN20, +1.23% tacked on 1.2% to $2.3725 a pound. July platinum PLN20, +0.66% rose 0.7% to $801 an ounce and June palladium PAM20, +2.88% traded at $1,944.90 an ounce, up 3.5%.
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