Gold gains amid expectation of monetary easing

Bengaluru — Gold prices rose for a second straight session on Tuesday, as expectations grew for monetary policy easing by central banks to cushion the economic fallout from the fast-spreading coronavirus outbreak.

Spot gold climbed by 0.5% to $1,597.66 an ounce by 2.36am GMT after a 0.4% gain on Monday. US gold futures advanced 0.3% to $1,599.10.

“Expectations that major central banks around the world are going to aggressively cut rates, which is the sentiment at the moment … supporting gold,” said Jeffrey Halley, a senior market analyst at Oanda, adding that virus fears kept the metal supported.

Traders on Monday piled into bets that the US Federal Reserve 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 US central bank.

The European Central Bank joined the chorus of central banks signalling readiness to deal with the economic effects of the outbreak. Lower interest rates reduce the opportunity cost of holding non-yielding bullion and weigh on the dollar, making greenback-denominated gold cheaper for investors holding other currencies.

Expectations for aggressive monetary policy easing also supported global equities, with MSCI’s broadest index of Asia-Pacific shares outside Japan up 0.8%.

Gold is moving along with equities as investors re-establish positions after liquidating them last week to meet margin calls in other assets, said Oanda’s Halley, adding that lower US Treasury yields also supported the metal.

Benchmark US 10-year Treasury yields hovered close to record lows touched in the previous session.

Meanwhile, data released on Monday showed US factory manufacturing activity slowed last month as new orders contracted, reflecting worries about supply-chain disruptions due to the virus outbreak and underscoring the need for an interest-rate cut.

Investors are waiting for the G7 conference call later in the day, when finance ministers and central bank governors will discuss measures to deal with the epidemic and its economic impact.

Among other precious metals, palladium gained 1% to $2,548.36 an ounce, while platinum rose 1.5% to $872.95. Silver was up 1.3% at $16.94 an ounce.

Reuters