Gold Surges as Recession Fears Spur Safe-Haven Buying

Gold jumped more than 1.5% on Wednesday as investors continued to seek safe havens on mounting concern that the near-global lockdown to fight the coronavirus pandemic would spark a deep economic downturn.

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Spot gold was up 0.7% at $1,582.54 an ounce by 1241 GMT, rebounding from a 3.1% slump in the previous session. U.S. gold futures gained 0.1% to $1,598.00.

“Gold once again underpinned its status as a safe haven during the current corona crisis,” Julius Baer analyst Carsten Menke said in a note, adding that constraints to global air travel and the closure of gold refineries are showing up in price premiums.

“As the global recession unfolds and as uncertainties remain very high in financial markets, we still see more upside than downside for gold,” he said. Financial markets and oil prices tumbled in the first trading session of the quarter as the pandemic and the prospect of a global recession tore through investor confidence.

Gold is often used as a safe store of value during times of political and financial uncertainty and tends to appreciate on expectations of lower interest rates, which reduce the opportunity cost of holding it.

Central banks have rolled out fiscal and monetary measures in an effort to limit economic damage from the coronavirus, which has infected more than 851,000 people and forced lockdowns across the globe.

On the supply side, three of the world’s largest gold refineries said they had suspended production in Switzerland for at least a week after local authorities ordered the closure of non-essential industry. The dollar also marched higher against major currencies, gaining more than 0.6%.

On Tuesday the U.S. Federal Reserve broadened the ability of dozens of foreign central banks to access dollars during the crisis by allowing them to exchange their holdings of U.S. Treasury securities for overnight dollar loans.

Reflecting investor interest in bullion, the Perth Mint’s gold product sales in March soared to their highest in about seven years, it said on Wednesday. Holdings in SPDR Gold Trust , the world’s largest gold-backed exchange-traded fund, rose 0.3% to 967 tonnes on Tuesday.

Elsewhere, platinum dropped 1.6% to $710.65 an ounce, palladium slipped 0.6% to $2,338.09 and silver was steady at $13.97.