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Gold & Silver Rally, Crude Falls as Death Toll from Coronavirus Rises

January 30, 2020 at 9:23 by Vladimir Vyun

Futures for gold and silver rallied, while prices for crude oil declined today. Markets remained in the grip of fear as the dangerous coronavirus continued to spread. The number of confirmed cases of infection rose to 7,700, while the death toll reached 170. The disease originated in China, therefore countries around the world have started to cancel flights to the Asian nation. Economists wonder how strong the effect of the infection will be on the global economy, though it most certainly will be a negative one. Precious metals profited from risk aversion due to their role as a traditional safe haven, while crude suffered due to worries about global growth.

Gold got an additional boost from yesterday’s monetary policy announcement by the Federal Open Market Committee. While the FOMC left interest rates unchanged, the accompanying statement demonstrated a somewhat dovish bias. In particular, the Committee was concerned about inflation, saying:

On a 12-month basis, overall inflation and inflation for items other than food and energy are running below 2 percent. Market-based measures of inflation compensation remain low; survey-based measures of longer-term inflation expectations are little changed.

Crude oil, on the other hand, had a negative factor in the form of a bigger-than-expected increase of US oil inventories reported by the Energy Information Administration. The stockpiles grew by 3.5 million barrels last week, while traders were counting on an increase of just 0.7 million barrels.

Futures for delivery of gold in April gained $9.9 (0.63%) to $1,585.9 per troy ounce as of 9:18 GMT on COMEX today. March silver advanced by $0.23 (1.3%) to $17.72 per ounce. At the same time, the March contract for delivery of Brent crude dropped by $0.72 (1.33%) to $52.61 per barrel on NYMEX, while Brent crude tumbled by $0.81 (1.35%) to trade at $59.00 per barrel on ICE.

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