Last updated on May 15th, 2020 at 11:21 am
The prices of gold barely moved on Wednesday as traders and investors wait for Federal Reserve Chairman Jerome Powell’s speech scheduled today at 1300 GMT. He is expected to clarify the condition of the U.S. economy and the speculation on the planned adoption of negative interest rates. Yesterday, President Donald Trump has again called on the Feds to implement negative interest rates. But as early as last week, money market instruments were already priced based on negative rates.
Spot gold was trading at $1,703.89 an ounce of 1052 GMT.
Ilya Spivak, a currency strategist at DailyFx, commented that the indecision of gold investors today was influenced by the uncertainty in the Fed’s chances of achieving desired liquidity with the adoption of negative policy rates. But he said the speculation about negative rates is positive for the yellow metal.
Citi Research, in a note, stated that they do not expect the Feds to adopt negative rates since it has other monetary policy tools that can be used to enhance liquidity. But they do expect broad asset market drawdowns and gold market liquidation in the next three to six months. Despite this, they believe will remain in the $1,600-$1,700 an ounce price level.
Meanwhile, the International Monetary Fund (IMF) managing director Kristalina Georgieva said yesterday that it is very likely that the IMF will reduce its forecasts for global economic growth. She explained that the COVID-19 pandemic is affecting many countries greater than previously projected. Incoming data from many countries is worse than the already pessimistic projections of the IMF, she added.
In the U.S., the coronavirus crisis has resulted in the loss of more than 20.5 million jobs. This is the largest increase in unemployment rate since the Great Depression. Also, the U.S. consumer prices dropped to its lowest level since April 2008.
In a related development, the holdings of the largest gold-backed exchange-traded fund in the world SPDR Gold Trust grew by 0.24% to 1,083.66 tons yesterday. This reflects investors’ interest for the yellow metal.