Gold rises 1pc as central bank stimulus fuels investor interest

• Spot gold was up 1.2pc at $1,735.55 per ounce by 1207 GMT, holding near a more than seven-year high hit earlier this week. U.S. gold futures rose 1.3pc to $1,763.
• U.S. retail sales plunged 8.7pc last month, the biggest decline since the government started tracking the series in 1992, while manufacturing output fell by the most in 74 years.

Gold prices rose more than 1pc on Thursday as a raft of stimulus measures from central banks to counteract the coronavirus crisis drove investors into bullion as a safe store of value, while sombre U.S. economic reports stoked fears of a global recession.

Spot gold was up 1.2pc at $1,735.55 per ounce by 1207 GMT, holding near a more than seven-year high hit earlier this week. U.S. gold futures rose 1.3pc to $1,763.

"The main factor supporting gold at the moment is the extraordinary amount of stimulus from central banks. I don't think it's been fully priced in yet," OANDA analyst Craig Erlam said.

"The record highs hit in the aftermath of the global financial crisis, and even higher, look perfectly reasonable, under the circumstances. The $1,800 level does not seem very far away."

U.S. retail sales plunged 8.7pc last month, the biggest decline since the government started tracking the series in 1992, while manufacturing output fell by the most in 74 years.

Japanese business confidence plunged to decade lows in April, while British retail spending slumped by more than a quarter during the first two weeks of lockdown measures.

Gold, which is often used as a safe store of value during times of political and financial uncertainty, is highly sensitive to interest rates, as lower rates reduce the opportunity cost of holding non-yielding bullion.

Central banks have rolled out a wave of fiscal and monetary measures to ease the economic damage from the virus, which has infected more than 2 million people globally and killed 136,667.

Focus now shifts to U.S. jobless claims data on Thursday which is expected to show a jump to 20 million over the past month.

While gold usually gains from reduced risk appetite, bullion has, on occasion, moved in tandem with equities recently, with sharp sell offs in wider markets prompting investors to sell precious metals to cover losses elsewhere.

"While gold will continue to be in demand, sometimes investors need funds to cover their margin calls, so losses in other financial assets might lead to falls in the gold price," said John Sharma, economist at National Australia Bank.

Gold's latest rise came despite gains in the dollar, also considered a safe haven.

On the physical side, gold consumption in India, the second largest buyer of the precious metal, could hit a three-decade low in 2020 as a nationwide lockdown has closed jewellery stores during key festivals and the wedding season.

Elsewhere, palladium climbed 0.9pc to $2,199.54 an ounce, and platinum gained 1.2pc to $788.92. Silver rose 0.5 to $15.54 per ounce.