Fed Announcement Boosts Gold

Fed Announcement Boosts Gold

Fed announcement boosts gold this morning. Just prior to the opening of the markets, the Federal Reserve announced a slew of new programs to help market functioning. Gold jumped over $30 on the news while equities leapt back into positive territory. The U.S. Stock Markets had stopped trading overnight when congress failed to pass the stimulus bill.

While gold has stayed solidly above $1,520 since the Fed’s announcement, but equities slipped back with the Dow falling 500 points at the opening bell. Currently, the Comex April contract for gold is at $1,529.90, up over $40 an ounce.

The Fed’s programs include open-ended commitment to keep buying assets under its quantitative easing measures. There are multiple other programs, including one for Main Street business lending and others aimed at keeping credit flowing.

All eyes are now on Congress, as the Senate is set to vote on the stimulus package again at Noon Eastern.

A rising toll of coronavirus cases around the world, with soaring death tolls in Italy and lockdowns in the largest U.S. cities and states, triggered panic selling in the broader market, accelerated by the U.S. Congress’s failure to pass a massive stimulus bill late Sunday. The dollar also held near a three-year high, making gold less attractive as an alternate investment. The Senate is set to vote on the measure again Monday, shortly after the U.S. stock market opens.

The $1.8 trillion stimulus bill designed to flood the U.S. economy with cash to protect millions of jobs and businesses failed to move forward in a procedural vote late Sunday in the Republican-controlled Senate. The measure was blocked by Democrats who said that the bill didn’t do enough to shore up the health-care system and help average Americans.

The most-active gold futures contract, which rolled to June from April late last week, dropped 1.9% last week to settle at $1,488.10 an ounce on Comex. The yellow metal started last week by climbing above the $1,700-an-ounce threshold for the first time in more than seven years. Then it was hit by the liquidity crunch as equities tumbled into a bear market and economic activity around the world has ground to a halt because of the coronavirus.

Investors continue to be spooked by the escalating impact of the novel coronavirus, designated COVID-19, on the global economy. The coronavirus has killed more than 14,000 people worldwide and sickened almost 328,000. The first cases were in China, but has spread to the rest of the world. A 10th of the cases are now in the U.S., though just 2.8% of the deaths. The virus is a WHO-designated pandemic.

Goldman Sachs Group Inc. and Morgan Stanley economists have declared that the coronavirus has triggered a global recession, and the only questions remaining are how bad it will be and how long it will last. The U.S. Federal Reserve has reduced interest rates to almost zero with two surprise cuts in as many weeks, joining central banks around the world in attempts to prop up the economy. Despite trillions of dollars of support to markets in recent days, central banks will likely have to do more to curb the damage, according to a Reuters survey of investors, economists and bank strategists.

May silver futures tumbled 15% last week to settle at $12.39 an ounce on Comex, despite advancing 2.1% on Friday. Spot palladium decreased 9.4% last week to $1,642.72, adding to the prior week’s 30% decline. Spot platinum plummeted 20% last week to $613.44 an ounce, despite rallying 3.8% on Friday.

 

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