Gold futures climbed Friday morning, headed for the sharpest weekly gain since June as steadily sliding government bond yields offered fresh support to the haven asset that is on pace for a seventh straight daily gain and its biggest weekly rise since the summer.
Goldman Sachs in a recent research note wrote that bullion could top $1,850 an ounce in the near term if the outbreak of COVID-19, the infectious disease that reportedly originated in Wuhan, China, can’t be contained by the second quarter.
The analysts say the illness, which has claimed more than 2,200 lives and sickened 76,767 people, according to the World Health Organization’s latest tally, has more room to run “depending on the magnitude of the monetary policy response.”
Gold for April delivery GCJ20, +1.59% on Comex added $24.10, or 1.5%, to $1,644.70 an ounce on Comex, with the metal on pace for a weekly gain of more than 3.5%, which would mark the sharpest weekly rally for a most-active contract since the week ended June 19, according to FactSet data.
The powerful rally for the precious metal, which has sparked renewed interest by market analysts, comes as the 30-year bond yield TMUBMUSD30Y, -2.14% slipped 4.2 basis points to 1.930%, falling below its previous all-time low of 1.95%.
Precious metals don’t offer a coupon so falling yields can underpin gains for the hard commodity.
Investors have been worried that the disease could hamstring Asian economies, considered linchpins for industries like semiconductors and automobiles, and fuel a global economic slowdown.
That said, Federal Reserve members have been sanguine about the outlook for the domestic economy thus far. St. Louis Fed President James Bullard said Friday in an interview on CNBC that there is a “high probability” the COVID-19 outbreak will be a temporary shock, while Atlanta Fed President Raphael Bostic on CNBC said he expected U.S. gross domestic product to remain healthy.
In other metals, March silver SIH20, +1.07% rose 21 cents, or 1.2%, to $18.525 an ounce, with a weekly gain of 4.4% in sight, which would mark its sharpest weekly rise since the period ended Aug. 30.