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Gold Rebounds 2% on Growing Rate Cut Bet, Coronavirus Fears

March 2, 2020 at 14:29 by Andrew Moran

Gold futures are rebounding to start the trading week after suffering a huge crash on Friday. The yellow metal is climbing on growing odds that the Federal Reserve and other central banks will cut interest rates to shield the economy from the severe fallout of the coronavirus. With the Covid-19 outbreak expanding worldwide, monetary institutions are being encouraged to act by easing policy. This would be a boon for precious metals.

April gold futures soared $30.40, or 1.95%, to $1,597.20 per ounce at 13:14 GMT on Monday on the Comex division of the New York Mercantile Exchange. The yellow metal is recorded a steep 4% weekly loss, though it did enjoy a 3% monthly gain. Year-to-date, gold prices are up 5%.

Silver, the sister commodity to gold, is also rallying to kick off the trading week. May silver futures tacked on $0.28, or 1.7%, to $16.735 an ounce. The white metal also crashed 10% last week, though silver is looking to pare its 2020 loss of 7%.

It was a bloodbath on Friday for gold as investors either took the profits or they sold their holdings to cover their gigantic losses.

Fed Chair Jerome Powell assured markets that the Eccles Building will “act as appropriate” to support economic growth as the coronavirus seems to be spreading throughout the US. The US recorded two coronavirus-related deaths this week, and there are more reports of infections in Oregon, Washington State, Florida, New York, and Rhode Island. On an international level, the death toll exceeded 3,000 and the number of confirmed cases is nearing 90,000. The major concern for investors is the outbreak’s impact on global supply chains and the various reports of community spread in many pockets.

Markets are penciling in at least three cuts to interest rates this year. The growing expectations have put a lot of pressure on the US dollar as the greenback has erased 2% in the last week. On Monday, the US dollar Index, which measures the buck against a basket of currencies, fell 0.52% to 97.62.

low-rate environment and a weaker dollar are good for commodities. When rates are low, it sends investors into non-yield assets, while a tumbling buck makes it cheaper for foreign investors to purchase.

In other metal markets, April copper futures added $0.02, or 0.72%, to $2.565 an ounce. April platinum futures shed $8.40, or 0.97%, to $856.30 per ounce. April palladium futures slumped $81.10, or 3.26%, to $2,410.00 an ounce.

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