Gold rose on Wednesday after U.S. Federal Reserve Chairman Jerome Powell pledged more stimulus measures, if required, to ease the economic blow from the novel coronavirus.
Powell said the United States could face an “extended period” of weak growth and stagnant incomes and issued a call for more fiscal spending.
Spot gold gained 0.5% to $1,709.75 per ounce. Prices rose as much as 0.9% but eased after Powell rejected the idea of using negative interest rates as a stimulative tool. U.S. gold futures settled 0.6% higher at $1,716.40.
“The Fed has a number of other options, so it’s possible we could see additional quantitative easing or continued policies that would allow for a positive backdrop for the gold market,” said Standard Chartered Bank analyst Suki Cooper. “We expect interest rates globally to remain low, and negative in some countries, and that continues to provide a favourable backdrop for gold.”
The U.S. economy lost a staggering 20.5 million jobs in April, as citizens were compelled to stay home and businesses closed to curb the spread of the virus, which has infected 4.31 million people worldwide.
Central banks and governments have unleashed unprecedented fiscal and monetary support for economies reeling from the pandemic. Gold tends to benefit from widespread stimulus measures as it is considered a hedge against inflation and currency debasement.
The U.S. dollar index was steady, while U.S. stocks fell after Powell’s remarks.