Gold rebounds as economic worries offset higher Treasury yields
Gold prices surged after tumbling form a 1-week peak in the prior session as worries over an economic slump caused by the COVID-19 pandemic countered pressure from a rise in U.S. Treasury yields on Federal Reserve Chair Jerome Powell’s offer for more inflation tolerance.
Spot gold was trading 0.8 percent higher at $1,945.30 per ounce by 0635 GMT, having hit a high of $1977.18 the day before, its highest since August 19. U.S. gold futures rose 0.9 percent to $1,950.70. On Thursday, the safe-haven metal fell nearly 1.3 percent but was set for a gain of more than 0.1 percent so far this week.
Speaking at the Kansas City Fed's virtual economic symposium, Federal Reserve Chairman Jerome Powell said the U.S. central bank would roll out an aggressive new strategy to lift U.S. employment and inflation. The Fed’s new monetary policy strategy pledges to achieve inflation averaging 2 percent over time, offsetting below-2 percent periods with higher inflation for some time, and to ensure economic recovery and employment creation.
Powell’s comments were widely expected, but some traders were disappointed that the Fed did not reveal more details about how the new framework will work or provide any clues to what it will do at its next policy meeting.
Data released yesterday showed that the number of Americans filing new claims for unemployment benefits hovered around 1 million last week, suggesting the labor market recovery was stalling as the COVID-19 pandemic drags on and financial aid from the government depleting.
After talks with White House Chief of Staff Mark Meadows, U.S. House of Representatives Speaker Nancy Pelosi said that Democrats and Republicans struggled to agree on how much to spend on the next coronavirus relief legislation.
Separate report showed U.S. gross domestic product plunged at a 31.7 percent annualized rate last quarter, the deepest decline in output since the government started keeping records in 1947.
Risk sentiment slightly improved on news that Abbott Laboratories won U.S. marketing authorization for a COVID-19 portable antigen test that can deliver results in 15 minutes and will sell for $5.
According to a Reuters tally, more than 24.33 million people have been reported to be infected by the novel coronavirus globally and 826,948 have died.
The greenback against a basket of currencies traded 0.4 percent down at 92.67, having touched a low of 92.42 on Thursday, its lowest since August 19. The U.S. Treasury yields rose, with the benchmark 10-year note yield trading at 0.774 percent. The 10-year yield rallied to 0.785 percent in Asian trade, a level unseen since June 10.
Investors now await U.S. personal consumption expenditures price index, goods trade balance, personal spending, personal income, wholesale inventories, Chicago Purchasing Managers' Index and Michigan Consumer Sentiment Index for further clues on the strength of the economy.