Gold futures gained Thursday, stretching their advance to a seventh straight session, with market expectations for a Federal Reserve interest-rate cut this year building in the lead-up to Friday’s closely watched nonfarm payrolls report.
“It has become clear that the global economy is heading rapidly into a recession that could turn out to be deep,” Alasdair Macleod, head of research at Goldmoney, recently told MarketWatch. “The only solution is for central banks to cut interest rates and expand their monetary bases.”
“The purchasing power of paper currencies will be undermined by aggressive monetary expansion, and it is this realization which is the primary driver for gold prices today,” he said.
Gold for August delivery on Comex GCM19, -0.28% rose $9.10, or 0.7%, to settle at $1,342.70 an ounce. Most-active contract prices again settled at their highest since Feb. 20, according to FactSet data. The precious metal has now posted gains for seven consecutive trading sessions—the longest win streak since an 11-day rally ended Jan. 5, 2018. Gold has seen a more than 3% year-to-date advance, and trades 2.4% higher for the week so far.
The yellow metal stuck to its expected inverse relationship to the dollar index DXY, +0.07% which was down 0.4% as gold futures settled, pressured by a climb in the euro. The shared currency strengthened even though the European Central Bank pledged Thursday to maintain its low-rate policy through at least the first half of next year.
ECB President Mario Draghi didn’t fully commit to the rate cut that some market observers expected, which helped to push the euro higher.
“If you expect, as I do, that central banks will fail to engineer economic recovery, then buying physical gold and either taking delivery or storing it in secure vaults outside the banking system is far and away the best policy,” said Macleod.
The rise for precious metals comes as trade tensions between the U.S. and its international counterparts prompted Federal Reserve Chairman Jerome Powell earlier this week to suggest that an interest-rate reduction may be appropriate if tariff disputes weaken economic growth.
Read: Powell says Fed watching impact of trade tensions on economic outlook
Against that backdrop, “the greenback bulls have faded recently and the near-term price uptrend for the U.S. dollar has been negated to suggest a market top is in place,” said Jim Wyckoff, senior analyst with Kitco.
The prospect of lower borrowing costs has also helped yields on the 10-year Treasury note TMUBMUSD10Y, +0.36% decline, another supportive factor for buying in nonyielding gold.
Recent U.S. economic data mostly raised concerns over a slowdown. The Fed’s Beige Book late Wednesday showed the U.S. economy expanded at “a modest pace overall” from April to mid-May, but growth was partly held in check by labor shortages and worries over tariffs on China.
Traders await the latest monthly look at U.S. jobs growth due Friday, following a report Wednesday that revealed private-sector job growth eased to a nine-year low in May.
Higher broad-market uncertainty and volatility have supported flight-to-quality flows in to exchange-traded, gold-backed funds in recent weeks, but not enough to salvage net flows in May, according to a World Gold Council report.
Holdings in global gold-backed ETFs and similar products fell in May by 2.2 metric tons to 2,421 trillion, or the equivalent of $141 million in net outflows. Consistent European fund growth was offset by outflows in North America, mostly early in the month, and in Asia, the group said.
In all, global assets under management in these ETFs rose 1% to $101 billion as the price of gold rallied 1.7% during May. Year to date, global gold-backed ETFs have lost 0.5% in assets, worth about $535 million, mostly due to heavy outflows in February, April and early May.
The SPDR Gold Shares ETF GLD, +0.33% rose 0.7% in Thursday dealings, headed for a 2.4% gain this week.
Rounding out Thursday trading, July silver SIN19, -0.17% added 11.4 cents, or 0.8%, to $14.905 an ounce, up some 2.3% in the week so far.
“A three-month-old downtrend on the [silver] daily bar chart has been negated to suggest a market bottom is in place,” said Wyckoff, adding that silver bulls’ next upside price breakout objective is close above solid technical resistance at $15.40.
July copper HGN19, -0.38% rose 1.1% to $2.651 a pound. July platinum PLN19, -0.29% ended at $803.70 an ounce, up 0.1%, while September palladium PAU19, -0.37% settled at $1,349.10 an ounce, up 1.6%.