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Gold & Silver Jump 1% After Fed Suddenly Cuts Interest Rates Again

March 16, 2020 at 3:00 by Vladimir Vyun

Prices for gold jumped today as the race among central banks to zero interest rates continued. Silver followed the suit, while platinum and palladium hesitated. Two major central banks made surprise interest rate cuts — the US Federal Reserve and the Reserve Bank of New Zealand. Of course, markets paid more attention to the announcement from the Fed. US policymakers decided to slash the target range for the federal funds rate by a whole percentage point to 0%-0.25%. Market participants were expecting additional cuts after the emergency rate cut last week, but the decision still came as a surprise. Some analysts speculated that markets were pricing in a smaller cut by 50 points. Others argued that traders were not expecting another cut so soon, especially considering that a monetary policy meeting was scheduled for this week, giving the Fed a perfect opportunity for adjusting rates further.

Traditionally, prices for bullion moved inversely to interest rates. Non-yield-bearing gold finds less demand when investors hunt for higher interest in times of calm and safety. Consequently, when borrowing costs decline precious metals become more attractive.

The spreading coronavirus pandemic and resulting panic give investors additional reason to hoard bullion, which is traditionally considered a safe haven. But the recent collapse of gold prices made market participants question whether gold retains its role as a refuge asset.

Futures for delivery of gold in April jumped by $27.5 (1.81%) to $1,544.2 per troy ounce as of 2:57 GMT on COMEX today. May contract for silver climbed by $0.26 (1.76%) to $14.76 per ounce. Spot price for platinum rose a little by $1.2 (0.16%) to $764.48 per ounce, while palladium sank by $56.28 (3.1%) to $1,756.54 per ounce.

If you have any questions and comments on the commodities today, use the form below to reply.

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