May 18, 2020 / 5:07 AM / in 13 days

PRECIOUS-Gold jumps to highest since Oct 2012 on dismal U.S. data; palladium surges

 (Updates prices)
    * U.S. recovery may extend into next year - Fed's Powell
    * Palladium up over 3%, after surging over 9% earlier
    * SPDR gold holdings rise 0.82% on Friday
    * For an interactive graphic tracking the global coronavirus
spread, open tmsnrt.rs/3aIRuz7 in an external browser

    By Harshith Aranya
    May 18 (Reuters) - Gold rose 1% on Monday to its highest in
more than seven years as dismal U.S. data underscored how badly
the COVID-19 pandemic has damaged the world's top economy, while
palladium soared over 9% on better-than-expected demand outlook.
    Spot gold        was up 1% at $1,759.13 per ounce by 0708
GMT, after rising to its highest since Oct. 12, 2012 at
$1,764.46 earlier. U.S. gold futures        gained 0.9% to
$1,772.70.
    "Markets are pricing in that the (economic) recovery is
going to be a little slower than previously expected, and that's
probably going to require an environment of lower rates," said
IG Markets analyst Kyle Rodda, adding that Friday's "really
poor" U.S. economic data was the big catalyst.
    Data out on Friday showed U.S. retail sales and industrial
production both plunged in April, putting the economy on track
for its deepest contraction since the Great Depression.
            
    Federal Reserve Chairman Jerome Powell said a U.S. economic
recovery may stretch deep into next year and a full comeback may
depend on a coronavirus vaccine.             
    The Bank of England is also looking more urgently at options
such as negative interest rates as the economy slides into a
deep coronavirus slump, according to its chief economist.
            
    Gold is considered an attractive investment during times of
political or economic turmoil. Lower interest rates also reduce
the opportunity cost of holding non-yielding bullion.
    Adding to the bleak economic scenario was renewed Sino-U.S.
friction, with China's commerce ministry on Sunday saying it was
firmly opposed to the latest rules by the United States against
Huawei and would take all necessary measures to safeguard
Chinese firms' rights and interests.             
    "There is increased volatility as the rhetoric is becoming
very hot, and especially from the United States. That is
manifesting some weakness in growth-sensitive markets, and in
particular China-sensitive markets," Rodda said.
    Reflecting investor sentiment, SPDR Gold Trust      
holdings, the world's largest gold-backed exchange-traded fund,
rose 0.8% to 1,113.78 tonnes on Friday.          
    Among other precious metals, palladium        was up 3.3% at
$1,964.54 an ounce, having surged more than 9% earlier in the
session.
    "Both palladium and platinum are rising sharply after the 
World Platinum Investment Council (WPIC) provided their updated
metals forecast," said Edward Moya, a senior market analyst at
broker OANDA.             
    "The WPIC highlighted that the outlook for both metals is
better than expected, and that the COVID-19 impact could be less
(than expected)," he said, adding that the market was moving on
optimism over autocatalyst demand in China and America.
    Platinum        gained 1.1% to $806.55, while silver       
rose 3.7% to $17.23.

 (Reporting by Harshith Aranya and K. Sathya Narayanan in
Bengaluru; Editing by Subhranshu Sahu and Louise Heavens)
  
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