Gold Price Extended its Rally on Fed Action, Goldie says, Time to Buy

Gold Price Extended its Rally on Fed Action, Goldie says, Time to Buy


Gold extended its rally toward 1,600 oz after the Fed took unprecedented measures to protect the US economy from the coronavirus shock, with Goldman Sachs (NYSE:GS) saying bullion’s probably at an inflection point and it is time to buy.

The precious metal rallying with risk assets, after the Fed said Monday it would buy unlimited amounts of Treasury bonds and mortgage-backed securities to keep borrowing costs low. The Fed also set up programs to ensure credit flows to corporations as well as state governments.

The traditional haven is seeing a resurgence after declining over the last two weeks, when investors had favored the dollar and sold the precious metal to raise cash.

Goldie said the Fed’s move would help alleviate the funding stress that’s driven gold lower, and investors would now pivot to focus on the expansion of its balance sheet, just as they did in Y 2008.

Goldie also highlighted the rise in deficits in developed economies, as well as “issues around the sustainability” of European monetary union, according to a note.

We believe this will likely lead to debasement concerns similar to the post-GFC period,” analysts wrote in a 23 March note, referring to the global financial crisis. “Accordingly, we are likely at an inflection point where ‘fear’-driven purchases will begin to dominate liquidity-driven selling pressure, as it did in November 2008.

Spot gold climbed as much as 2% to 1,584.51 pz, and was at 1,573.89 at 7:10a in London, following a 3.6% rise Monday. The Dollar Spot Index dropped after hitting a record a day earlier.

Among the other main precious metals, silver added more than 2%, platinum advanced more than 3%, and palladium surged 6%. The two platinum group metals are extending gains amid the broader rise in precious metals.

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