Gold futures rebounded Monday, tacking on nearly 2% after suffering the sharpest drop since Y 2013 in the previous session, finding support as central banks promise to act appropriately to mitigate the effect of a viral outbreak that is expected to hurt global economies and supply chains.
Bank of Japan Gov. Haruhiko Kuroda said the central bank would take steps to steady markets, and bolster liquidity through short-term lending operations and asset purchases. On Friday, Federal Reserve Chairman Jerome Powell issued a rare, unscheduled statement, emphasizing the central bank’s intention to act appropriately to address the risks posed by the coronavirus.
There were fewer margin calls in the stock market Monday and growing expectations of Fed moves as markets are signaling rate cuts.
Expectations for a Fed interest rate cut at the March 18 meeting are rising “and gold’s appeal as a safe haven is still strong” as the likelihood of “further coronavirus problems and upcoming political headlines in the US, Israel, South America, Greece, Eurozone and Middle East worries are still intact.”
In Monday dealings, gold for April delivery GCJ20, +0.36% on COMEX rose 28.10, or 1.8%, to settle at 1,594.80 oz. It fell nearly 5% Friday the biggest 1-day percentage loss since the week ended 20 June 2013. The precious Yellow metal last week also marked a weekly slide of about 5%.
Still, gold is up more than 4% so far this year, according to FactSet data, based on the most-active contracts.
May silver SIK20, +1.08%, rose 28.2c, or 1.7%, to 16.739 oz, after registering a more than 7% drop Friday, which contributed to a weekly fall of about 11.6%. The Devil’s Metal marked its sharpest weekly slide since the period ended 19 April 2013. Silver is down around 7% YTD.
Providing an added boost to safe-haven demand for the precious metals, the Institute for Supply Management said its U.S. manufacturing index dipped to 50.1% last month from 50.9% as most US manufacturers said business began to slow.
Gold fell Friday on the heels of an intense stock selloff, with investors speculating that bullion was registering losses as investors looked to raise cash.
Gold had enjoyed a big run up on growing uncertainties around the infectious disease.
However, the chief market analyst at Insignia Consultants, said Monday that “investors will never be able to cover their losses from the stock markets.”
Instead, “investors need higher allocation to hard assets like gold and real estate,” he said “Investors can get higher returns buy diversification into gold and exiting when they get good profit. Even gold short term investment need to be exit’d if one gets a good profit.”
The current rise in gold futures is due to new investment demand in gold and higher physical gold demand all over Asia, new gold investors have started investing in gold.
Among other metals, May copper HGK20, +0.44% added 2.2% to 2.595 lb, April platinum PLJ20, +1.61% fell by 0.6% to 859.40 oz and June palladium PAM20, +0.07% shed nearly 2.6% to 2,427.70 oz.