Gold price rises as fears for the economy loom large

London (May 20)  Gold prices rose on Wednesday as fears of prolonged global economic weakness leapt to the fore, pushing aside premature excitement about a possible coronavirus vaccine, and prompted investors to seek safe-haven bullion.

Spot gold was up 0.3% at $1,749.44 per ounce by 1044 GMT. U.S. gold futures rose 0.6% to $1,756 per ounce. "The situation worldwide is still tense as far as the coronavirus is concerned. The economic outlook and a lower interest rate environment and lower stock markets are helping gold prices to go higher," Afshin Nabavi, senior vice president at precious metals trader MKS SA, said.

Stocks markets drifted lower after a media report said the results from Moderna Inc's COVID-19 vaccine trial, which had buoyed global stocks this week, lacked detail. The latest batch of economic readings underscored the impact on the global economy of the coronavirus outbreak, which has infected almost 4.91 million people globally.

On Tuesday data showed, U.S. house-building dropped by the most on record in April and permits for future construction tumbled, intensifying fears over the deepest economic contraction in the second quarter since the Great Depression.

Gold is often used as a store of value during times of political and financial uncertainty. In testimony before the U.S. Senate Banking Committee, Federal Reserve Chairman Jerome Powell said the Fed was looking at extending access to the credit facilities to additional borrowers, including states with smaller populations.

"What the Fed does in the next few months will be pretty important, and certainly Powell did indicate that the rates would remain near zero for foreseeable future," ANZ analyst Daniel Hynes said.

The focus shifts to the Federal Open Market Committee's April 28-29 policy meeting minutes at 1800 GMT. Among other precious metals, palladium jumped 1.6% to $2,091.20 per ounce, silver rose 0.2% to $17.44 and platinum climbed 1.2% to $842.56.

Reuters