The Gold price remained well supported held on Friday as fears grow on the continuous spread of coronavirus and its impact on the global economy as a whole is raising expectations that central banks around the world may start slashing interest rates to counter the effects of this epidemic.
The virus, which started out in China, is now spreading rapidly to other countries, keeping investors on edge and spuring demand for assets such as gold as a safe haven asset.
“Uncertainty over the virus continues to see investors flocking towards the yellow metal, with gold ETF holdings increasing for 26 consecutive days, with inflows over that time growing by 2.72 million ounces to total 84.43 million ounces currently,” said Warren Patterson, head of commodities strategy at ING
“Given this uncertainty is likely to linger, along with the prospect for lower rates, it suggests that gold prices are the to remain well supported.” He added.
One of the countries that will need to consider cutting interest rates is the USA, which up until a few months ago, was likely not in the plans for the US Federal Reserve and if this move eventuates, the gold price is likely to receive a further boost.
“The rapid spread of the coronavirus beyond China has heightened investor’s fears over its potential impact on the global economy,” said Steven Dunn, head of exchange-traded funds at Aberdeen Standard Investments, in emailed commentary.
“Some are even suggesting an additional rate cut from the Fed at their March meeting which would provide further support for gold. While the calls may be early, it is clear that global growth will be compromised the longer the virus remains uncontained.” He added.
The rise of potential presidential nominee Bernie Sanders in the US may also prove to be an unexpected boost for gold as he creates uneasiness in financial markets with phrases “taxing billionaires” and “taking on Wall Street”
If Sanders continues to gain in the polls and in fact wins the presidential nomination to face off with Donald Trump, we may see investors enter gold positions to counter the effects of a potential president that seems to be against big business
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