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Gold Spikes 5% on Unprecedented QE Infinity, Market Turmoil

March 23, 2020 at 17:56 by Andrew Moran

Gold futures are surging more than 5% to kick off the trading week, buoyed by an unprecedented move by the Federal Reserve to purchase assets without any limits. After falling sharply this month, investors are pouring into the traditional safe-haven asset, and this could be the time the yellow metal soars.

April gold futures spiked $83.20, or 5.6%, to $1,568.10 per ounce at 17:38 GMT on Monday on the Comex division of the New York Mercantile Exchange. Gold has erased its year-to-date loss and it is now up more than 3% on the year.

Silver, the sister commodity to gold, is also rallying to start the trading week. May silver futures soared $0.745, or 6.02%, to $13.13 an ounce. The white metal is still down more than 26% YTD.

The US central bank announced before the opening bell on Monday that it will launch unlimited quantitative easing to stabilize the economy. The Fed abandoned its previous $700 billion QE limit, choosing to rescue financial markets by purchasing assets without any limits. It will also begin acquiring corporate bonds, while the New York Fed Bank confirmed it is buying $75 billion Treasurys and $50 billion agency mortgage-backed securities every business day this week.

This is in addition to the multi-trillion-dollar stimulus the Fed initiated this month and 0% interest rates.

Markets initially reacted favorably to the news, but then the leading stock indexes crashed. Bonds have also tumbled as the benchmark 10-year Treasury note slipped to 0.748%.

Precious metals further benefited on a lower US Dollar Index as the Fed attempts to weaken the greenback. The index plummeted 0.64% to 102.19, from an opening of 101.65. A weaker buck is good for commodities priced in dollars because it makes it cheaper for foreign investors to purchase.

Ostensibly, gold traders are hoping for a repeat of the 2008 financial crisis when the yellow metal topped $1,700. The idea is that if the Fed and the US government’s $2 trillion stimulus bill is unable to calm markets, then skyrocketing gold prices will let everyone know.

In other metal commodities, May copper futures fell $0.075, or 3.5%, to $2.0955 a pound. April platinum futures jumped $10.10, or 1.62%, to $632.60 an ounce. April palladium futures picked up $18.60, or 1.21%, to $1,558.80 an ounce.

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

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