March 03, 2020
Gold prices rise on global monetary stimulus bets
(Reuters) - Gold prices rose on Tuesday as expectations grew for monetary policy easing by major central banks to limit the economic fallout from the fast-spreading coronavirus.
Spot gold climbed by 0.5% to $1,598.59 per ounce by 0520 GMT, after a 0.4% gain on Monday. U.S. gold futures advanced 0.4% to $1,600.90.
Both U.S. Federal Reserve Chairman Jerome Powell and European Central Bank (ECB) President Christine Lagarde have hinted at action in recent days.
"Due to the coronavirus central banks are in a hurry to make fresh cuts and that is making ground for gold," said Vandana Bharti, assistant vice-president of commodity research at SMC Comtrade.
"We were expecting a Fed rate cut in the second half of 2020 but we may see one in the first half."
Traders on Monday piled into bets that the Fed will deliver a big dose of stimulus starting this month amid growing concerns over the economic impact of the epidemic.
April Fed funds rate futures imply a 0.50 percentage point cut by the U.S. central bank.
Lower interest rates reduce the opportunity cost of holding non-yielding bullion.
Expectations for aggressive monetary policy easing also supported global equities, while the dollar held close to a 1-1/2-month low hit in the previous session.
Gold is moving along with equities as investors re-establish positions after liquidating them last week to meet margin calls in other assets, said Jeffrey Halley, a senior market analyst at OANDA, adding that lower U.S. Treasury yields also supported the metal.
Benchmark U.S. 10-year Treasury yields hovered close to record lows touched in the previous session.
Meanwhile, data released on Monday showed U.S. factory manufacturing activity slowed last month as new orders contracted, reflecting worries about supply chain disruptions due to the virus and underscoring the need for a rate cut.
Investors are waiting for a likely G7 conference call later in the day, where finance ministers and central bank governors will discuss measures to deal with the epidemic and its economic impact.
On the technical front, spot gold may bounce towards $1,631 per ounce, Reuters technical analyst Wang Tao said, adding that support was at $1,584 per ounce and a break below that could
cause a fall to $1,565.
Among other precious metals, Palladium gained 0.9% to $2,544.79 per ounce, while platinum rose 1.2% to $871.01. Silver was up 1.1% at $16.91 per ounce.