Gold futures edged up on Thursday, with the haven metal finding support after the European Central Bank significantly expanded and extended its stimulus efforts, as it moved to counter the impact of a resurgence of COVID-19 cases on the economy.
The decision, widely expected, comes ahead of the Federal Reserve’s rate-setting meeting next week.
Data on weekly U.S. jobless benefit claims also contributed to gold’s price gains, as claims surged to a nearly three-month high of 853,000, up 137,000 last week.
The data has taken a “wrong turn” in recent weeks, suggesting that the market may be seeing a “new trend, under which the labor conditions are deteriorating,” said Naeem Aslam, chief market analyst at AvaTrade, in a note ahead of the report on jobless claims.
February gold was up $3.30, or 0.2%, at $1,841.80 an ounce, after the precious metal fell to its lowest finish in about a week in the previous session.
The ECB said it would expand the size of its pandemic emergency purchase program, or PEPP, by 500 billion euros to 1.85 billion euros and extend monthly purchases by nine months to March 2022. The central bank also said it would continue buying 20 billion euros a month in securities through its asset purchase program, and that the program would run as long as necessary.
Trading in bullion and other precious metals comes against the backdrop of rising cases of COVID-19 in the U.S. and Europe and efforts to rollout vaccines to halt the deadly infection.
The U.S. is awaiting a decision from the Food and Drug Administration as it aims to review a possible approval of the coronavirus vaccine candidate from a partnership of Pfizer and Germany’s BioNTech, coming after the U.K. on Tuesday began using the vaccine.
Progress on a vaccine rollout and the prospect of a return to economic normality has been a headwind for gold but expectations for greater spending by governments to combat the economic damage from the pandemic has helped to buttress gold prices.
Meanwhile a fiscal relief package is still being negotiated by U.S. lawmakers as they attempt to coalesce around an coronavirus spending package that could total some $900 billion to provide further aid to workers and businesses.
Gold prices came under selling pressure Wednesday “as hopes for the second stimulus package dimmed,” said Aslam. “It doesn’t look like that the U.S. economy is going to see another stimulus package anytime soon because U.S. Senate Majority Leader Mitch McConnell wasn’t optimistic.”
“The absence of the stimulus package represents a mammoth risk for the U.S. economy, as businesses are struggling due to the rise in coronavirus cases,” said Aslam. Given that, “selling gold at current levels may not be the best strategy, as investors are likely to move away from riskier assets.”
Other metals traded on Comex moved higher, with March silver tacking on 1% to $24.235 an ounce.
March copper rose 2.1% to $3.586 a pound, with prices for the most-active contract poised for their highest settlement since early 2013, according to FactSet data. They’ve been trading at their highest in over seven years for most of this month.
January platinum also tacked on 2.1% to $1,039.80 an ounce and March palladium climbed by 2.4% to $2,345.50 an ounce.