Gold steadies near 1-month peak as recession risks rise
London (Apr 13) Gold prices held steady near a one-month high on Monday, supported by growing concerns over the extent of the economic hit from the coronavirus pandemic.
Spot gold was up 0.1 per cent at $1,690.08 per ounce by 0916 GMT, having risen to its highest since March 9 on Friday. Most European markets are closed for the Easter Monday holiday.
US gold futures fell 0.6 per cent to $1,741.40.
"Gold has been on the positive side from the last two to three weeks; mostly it's safe-haven buying and the main reason is that the global economy is likely to face a recession because of the COVID-19 issue," Hareesh V, head of commodity research at Geojit Financial Services, said.
More than 1.8 million people have been infected by the coronavirus globally and 113,849 have died, a Reuters calculation of the totals shows.
The coronavirus pandemic, which has battered global economic growth, has forced nations to extend lockdowns to curtail its spread, and central banks have announced a wave of fiscal and monetary support measures to mitigate the financial toll.
The US Federal Reserve on Thursday announced a broad, $2.3 trillion stimulus package to weather the outbreak, which has forced 16.8 million Americans to file for unemployment benefits since the week ended March 21.
"COVID-19's deflationary effect has been a headwind for gold. But this trend should reverse in 2H20 as policy responses by governments and central banks gather traction, UBS analysts said in a note.
"Led by Fed easing, we now expect real US interest rates to dip deeper into negative territory and perhaps even test the post-GFC (global financial crisis) lows," UBS said.
Gold is highly sensitive to interest rates, as lower rates reduce the opportunity cost of holding non-yielding bullion.
Reflecting appetite for bullion, holdings in SPDR Gold Trust GLD, the world's largest gold-backed exchange-traded fund, rose 0.6 per cent to 994.19 tonnes on Thursday.
European Union finance ministers also agreed on half-a-trillion euros worth of economic support, but left open the question of how to finance recovery in the bloc.
Among other precious metals, palladium rose 2.9 per cent to $2,233.96 per ounce, while platinum dipped 0.7 per cent to $743.06 and silver fell 0.3 per cent to $15.27.
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