On June 16, gold rose during the Asian session after the United States Federal Reserve boosted its program of buying corporate debt. The strategy aims at combating the financial crisis of the COVID-19 pandemic as fears increase about a second wave of the infections.
Spot gold gained 0.3% to $1,730.05 per ounce by 0318 GMT after it had lost over 1% in the previous trading session. U.S. gold futures gained 0.6% to reach $1,737.80. ANZ analyst Daniel Hynes said:
“The Fed pushing ahead with further stimulus measures, including these corporate bonds, indicates that this type of monetary easing is going to continue for some time. There are enough concerns around the economic outlook to keep investor demand for gold pretty solid.”
Nonetheless, the improving risk sentiment might curtail more investor appetite for the precious metal, according to Hynes. Gold usually benefits from widespread stimulus measures from major central banks around the world; since it is widely seen as a hedge against currency debasement and economic inflation.
The Fed confirmed that it will begin purchasing corporate bonds on June 16 in the secondary market. That announcement sparked a risk-on move that sent the global stocks surging and weighed slightly on the US dollar. In that context, the Bank of Japan said that it plans to pump almost 110 trillion yen ($1 trillion) to the economy through its market operations and lending facilities.
On June 15, the global cases of coronavirus surpassed 8 million and the infections exploded in Latin America. China and the United States are also facing what experts say might turn out to be fresh outbreaks. National Australia Bank economist, John Sharma, said:
“Increasing infections imply economic weakness, need for continued further economic (fiscal and monetary support), which are all supportive of gold.”
Also, palladium climbed 2.1% to trade at $1,947.37 per ounce. On its part, platinum gained 1.2% to reach $820.68, having dipped to a one-month low on June 15. Silver lost 0.3% to settle at $17.37 but managed to hold above the last session’s near three-week low.