Gold Heads for Third Monthly Gain

Gold Heads for Third Monthly Gain

Gold heads for third monthly gain, but still retreated earlier today as investors gave in to profit-taking temptation sparked by gold’s 1% jump in the last session. The yellow metal still getting some support from speculation that the rapidly spreading coronavirus could lead to rate cuts by central banks.

Gold futures headed for a third consecutive monthly gain. Bullion settled at $1,642.50 an ounce Thursday on Comex, down 60 cents for the day. Currently, the April contract is at $1,625.50.

Meanwhile, the Dow Jones Industrial Average continues its dramatic decline. It tumbled 1,191 points yesterday, the biggest single-day point-total decline in history. At this morning’s opening bell, the Dow was down just shy of 800 points. The Standard & Poor’s 500 Index slid to its lowest level since 2011. The Dow, the S&P and the Nasdaq Composite Index all fell into correction territory. Global stock markets have lost $6 trillion in value over the past six days due to coronavirus fears, $4 trillion of that loss was in U.S. markets.

Equities’ freefall — all three U.S. benchmark indexes were poised for their worst week since the fall of 2008, during the Great Recession — has boosted gold’s appeal as an alternate investment. And investors are speculating that the world’s central banks will have to cut interest rates sooner rather than later to defend global economic growth. Rate cuts are typically bullish for gold.

The CME FedWatch Tool shows 100% odds of a rate cut by the Federal Reserve in March, compared with just 11% a week ago. It also shows a 100% probability of a rate cut in April, compared with 39.7% a week earlier.

Mark Zandi, chief economist at Moody’s Analytics, told Bloomberg that a global recession is likely if the coronavirus develops into a pandemic. And he put the odds of that at 40%. The coronavirus, designated COVID19, has killed almost 2,900 people worldwide and sickened more than 83,000. Most of the cases have been in China, where the outbreak started. The virus is a WHO-designated global health emergency.

Front-month gold is up 3.4% for February, through Thursday, and approached $1,700 an ounce early in the week. April futures fell 0.4% in the first four days of the week.

In economic news, U.S. GDP grew at a 2.1% annualized rate in the fourth quarter, according to second-estimate data from the Commerce Department Thursday. The figure was unrevised from the first estimate. The economy grew 2.3% in 2019, the slowest rate in three years. Weekly initial jobless claims rose more than expected, and durable goods orders slipped in January. Pending home sales rebounded.

May silver futures fell 1% Thursday to settle at $17.74 an ounce on Comex. They dropped 4.7% in the first four days of this week. Front-month silver futures are down 1.5% so far this month.

Spot palladium, a metal used primarily in autocatalysts, rose 3.1% Thursday. It’s up 5.8% so far this week and 25% so far this month. Spot platinum fell 1.2% Thursday and is down 7.4% so far this week and 6% so far this month.

 

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