By Geoffrey Smith
Investing.com -- Gold prices rose back above $1,750 an ounce again on Thursday as a further easing of U.S. initial jobless claims eased the strain on risk assets and reduced the risk of margin calls.
By 11:25 AM ET (1525 GMT), gold futures for delivery on the Comex exchange were up 1.1% at $1,756.95 an ounce, while spot gold was up 1.1% at $1,732.46 an ounce.
Silver futures were likewise 1.4% higher at $15.55 an ounce, while platinum futures were 4.7% higher at $801.60.
U.S. Treasury bond yields were mixed, while eurozone yield spreads tightened after German Chancellor Angela Merkel prepared the Bundestag to accept much higher German contributions to the EU budget in future.
Her comments, ahead of an EU summit this evening, gave no hint of weakening on the central issue of joint debt issuance, but did allow for more borrowing by the EU in its own name to fund a European recovery. That would represent a better outcome for the cash-strapped periphery than seemed likely a few days ago.
Gold bulls were emboldened by the European Central Bank’s decision late on Wednesday to loosen the collateral rules for its lending operations, meaning that it will continue lending to Italian banks, even if – as seems likely – their sovereign’s credit rating is downgraded to junk as a result of the pandemic.
That played to the narrative of long-term currency debasement, as did another eye-watering number for initial U.S. jobless claims. At 4.427 million, they were down by some 15% from the previous week, but still point to an unemployment rate above 20% by the end of the quarter.
However, purchasing manager surveys from Europe earlier in the day indicated again indicated that the initial impact of the pandemic will be deflationary, rather than inflationary. The eurozone composite PMI fell to a record low of 13.5, as demand for services in particular collapsed against a background of reduced incomes and extremely depressed confidence.
Analysts at Barclays (LON:BARC) argued that the ECB should double its 750 billion euro bond-buying facility, known as PEPP, to accommodate the massive increase in government borrowing that is coming in the next few quarters.
Net funding needs, they noted, “are much higher compared to a month ago when the ECB’s PEPP was announced.”