Gold spiked Tuesday, rising 49, at 1,638 oz. There will be more gains as more investors view the precious Yellow metal as insurance against financial market instability at a time of ultra-low interest rates.
Gold got a lift from the Fed’s anticipated move Tuesday to cut its Key short-term rate by 0.50%, to a range of 1 – 1.25%. That has driven the continuing rally in the US Treasury market with the benchmark 10-yr T-Note marking below 1% for the 1st time.
“This should be positive for equities and positive for gold, at least short term, with rates lower and potentially other central bank action on the way,” Bruce WD Barren, Chairman of The EMCO/Hanover Group said in a telephone interview late Tuesday.
Lower interest rates reduce the opportunity cost of holding non-yielding bullion and also weigh on US yields and USD, in which gold is priced.
.DXY fell to its lowest in 2 months against a basket of peer currencies.
The Fed decision came after the G-7 finance officials earlier Tuesday said they would use all appropriate policy tools to support the economy against downside risks all posed by the fast-spreading coronavirus.
Among other precious metals, palladium fell 1.2% to 2,493.57 oz, silver spiked 3.3% at 17.28 and platinum climbed 1.3% to 871.13 oz.