The prices of gold today fell as investors went into profit-booking mode after the precious metal reached a more than seven-year high during the previous session. But further losses were checked by fears over the steep global recession resulting from the COVID-19 pandemic.
U.S. gold futures dropped by 1.1% to $1,748.60 an ounce while spot gold prices went down by 0.7% to $1,715.02 an ounce as of 0643 GMT. During the previous session, spot prices soared to its highest level since November 2012 at $1,746.50 an ounce. And earlier in today’s session, it was priced at $1,727.59 per ounce as of 0042 GMT.
According to OANDA’s senior market analyst Jeffrey Halley, the yellow metal appears to be consolidating at the top of its current price range but it remains supported by so much uncertainty. Central banks’ current policy actions and economic stimulus are lifting the demand and price of gold because low interest rates reduce the cost of holding gold. In addition, gold is considered as a hedge against currency debasement and inflation.
The COVID-19 pandemic has already infected close to 2 million and killed more than 120,000 people. It has forced many countries to temporarily stop economic activities. In the UK, budget forecasters predict that the economy will contract by 13% in 2020 and the country may experience its deepest recession in more than 300 years. Globally, the International Monetary Fund forecast a 3% decline in global economic growth due to the pandemic.
Meanwhile, U.S., President Donald Trump has floated the idea of reopening business operations and restarting the economy on May 1. But National Institute of Allergy and Infectious Diseases director Anthony Fauci said that the target date is “overly optimistic.” He explained that health officials must be able to quickly test for COVID-19 and track new infections before physical distancing measures can be lifted.
In a related development, the holdings of the largest gold-backed exchange-traded fund in the world SPDR Gold Trust has surged to 1,017.59 tons. This is close to its highest inventory level since May 2013. The continued inflows reflect investors’ interest in the yellow metal.