Gold Pauses On Stimulus Vote

Gold Pauses On Stimulus Vote

Gold pauses on stimulus vote following Tuesday’s massive gains took it near the $1,700 threshold. The yellow metal has been buoyed this morning by traders buying the dips.

Around 2am Eastern, the U.S. Senate reached an agreement on a bipartisan $2 trillion stimulus bill designed to flood the U.S. economy with cash to protect millions of jobs and businesses lost because of the expanding coronavirus crisis. The initial bill had failed two votes already this week 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.

Highlights from the bill include cash payments of up to $1,200 for individuals, $2,400 for married couples and $500 per child. The draft language also stipulated a $350 billion fund for small businesses to mitigate layoffs and support payroll. The bill is expected to pass the Senate vote quickly this morning and then moves to the House.

Equity futures are up a bit this morning after yesterday saw the largest U.S. stock market rally since 1933, driven by signs that a Stimulus deal was close. The Dow Jones Industrial Average skyrocketed more than 2,000 points, or 11%, to 20,704.91, while the Standard & Poor’s 500 Index increased 9.4% to 2,447.33.

The most-active gold futures contract, which rolled to June from April late last week, rallied 5.8% Tuesday to settle at $1,663.30 an ounce on Comex. The metal is up 12% in the first two days of the week. Currently, the April contract is at $1,644.60.

Gold fell 1.9% last week after climbing above the $1,700-an-ounce threshold for the first time in more than seven years. Then it was hit by a liquidity crunch as equities tumbled into a bear market and traders sold the precious metal to generate cash to pay off margin calls. Traders told Reuters that the precious metal is still subject to the tug-of-war between investors who think the yellow metal will hold its value and those still looking to cash in.

Markets remain volatile as the number of coronavirus cases around the world climbed and more countries — and U.S. cities and states — went into lockdown. The novel coronavirus, designated COVID-19, has killed more than 18,000 people worldwide and sickened almost 412,000. The first cases were in China, but has spread to the rest of the world.

About 13% of the coronavirus cases are now in the U.S., though just 3.8% of the deaths. The virus is a WHO-designated pandemic. The organization forecasts that the U.S. could be the next epicenter of the pandemic, spokeswoman Margaret Harris said Tuesday.

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, joining central banks around the world in attempts to prop up the economy.

In economic news, February data on U.S. durable goods orders and core capital goods orders were scheduled for release Wednesday. Fourth-quarter GDP and the key weekly jobless claims report are due out Thursday.

May silver futures rose 7.5% Tuesday to settle at $14.26 an ounce on Comex and is up 15% in the first two days of this week. Last week, it tumbled 15%.

Spot palladium increased 13% Tuesday to $1,948.98 an ounce and is up 19% in the first two days of this week after falling 9.4% last week. Spot platinum rallied 11% Tuesday to $712.85 an ounce and is up 16% in the first two days of this week. It plummeted 20% last week.

 

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