Gold Jumps as Mnuchin Says Treasury, Fed Have Plenty of Capacity

Gold jumped after U.S. Treasury Steven Mnuchin said his agency and the Federal Reserve have enough firepower to continue to support the economy.

The comments came a day after Mnuchin called for several emergency lending programs to expire by the end of the year. “Markets should be very comfortable that we have plenty of capacity left,” Mnuchin said Friday on CNBC. He also said he’ll talk with Senate Majority Leader Mitch McConnell and House GOP leader Kevin McCarthy on Friday about about a strategy for an approach to Speaker Nancy Pelosi and Senate Democratic leader Chuck Schumer.

Spot gold rose 0.4% at $1,873.98 an ounce at 1:50 p.m. in New York, after climbing as much as 0.7%.

The surge in gold “is just based off his comments,” Bob Haberkorn, senior market strategist at RJO Futures, said by phone. “When they can support it, that means there’s more money in the system.”

Gold Jumps as Mnuchin Says Treasury, Fed Have Plenty of Capacity

Still, prices are heading for a second weekly drop following positive news over shots being developed by companies including Pfizer Inc. Global bullion ETF holdings -- which were crucial to gold’s rally to a record in August -- are now at the lowest in more than two months.

While ETF investors have typically tended to take a long-term view of the market, the high cost of rolling futures contracts forward may have brought in more short-term traders, like hedge funds into ETFs, said Marcus Garvey, head of metals and bulks commodity strategy at Macquarie Group Ltd. That has led to more “fast money” in the products, meaning a quicker response to changes in gold’s outlook.

Bullion for December delivery on the Comex rose 0.6% to settle at $1,872.40 an ounce. Spot silver rose 1%, while platinum edged up and palladium was little changed. A gauge of the dollar was also steady.

©2020 Bloomberg L.P.

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