The prices of gold went down on Monday as the Japanese central bank expanded monetary stimulus to shield the economy against the coronavirus pandemic. The move by the Bank of Japan (BOJ) improved risk appetite and lifted the Asian stock markets. But the losses of the yellow metal were limited by continued fear over the possibility of a global recession.
U.S. gold futures were priced at $1,740.90 an ounce while spot gold was trading at $1,716.85 as of 0927 GMT.
The BOJ has followed other major central banks by unleashing an unprecedented amount of economic stimulus package. It pledged to buy unlimited amounts of government bonds and increase its purchase of risky assets. The central bank said it will increase its purchases of commercial debt and corporate bonds to 20 trillion yen or $186 billion to ease the strain on corporate funding,
The precious metal normally benefits from economic stimulus measures because it is considered as a hedge against currency debasement and inflation. However, the fresh stimulus from the BOJ also lifted Asian stocks, particularly Chinese shares which gained because of the decline in the number of new COVID-19 cases. Also, the U.S. dollar remains close to a three-week high against a basket of rival currencies and this makes gold more expensive for investors that use other currencies.
Another factor affecting gold price is investors’ optimism about the plans of several nations including the U.S. to ease some COVID-19-related restrictions and gradually reopen businesses.
On the technical front, Reuters’ technical analyst Wang Tao expects spot gold prices to test a support price of $1,703 an ounce. He believes a break away from this level could send the spot prices to $1,677.
In a related development, the holdings of SPDR Gold Trust, the largest gold-backed exchange-traded fund in the world, went up by 0.6% to 1,048.31 tons last Friday.