The prices of gold recovered in the early day as the worsening COVID-19 pandemic forced investors to return to the safety of the precious metal. The bullion was also supported by the expected easing of monetary policy by several major central banks.
U.S. gold futures rose by 0.3% to $1,600.70 an ounce. Spot gold prices, which plunged by 3.1% during the previous session, gained 1% today and traded at $1,587.31 an ounce as of 0605 GMT.
According to CMC Markets analyst Margaret Yang Yan, gold appears to have regained its status as a safe-haven asset. She noted that investors’ interest in the bullion was prompted by President Donald Trump’s prediction that the COVID-19 deaths in the U.S. will likely peak in the next two weeks.
Yan also said that the precious metal is supported by the cycle of monetary policy easing and the issuance of trillions of dollars in stimulus packages which will ensure an ample supply of cash in the months or even years to come.
Jeffrey Halley, OANDA’s senior market analyst, added that the improvement in China’s factory activity in March will support not only gold prices but also the Asian equities market.
China’s National Bureau of Statistics has announced that the official Purchasing Manager’s Index (PMI) for March was 52.0 which beat analysts’ expectations of only 45. But the bureau said that it does mean that economic activities have returned to normal and attributed the increase in PMI reading to the low base in February.
Meanwhile, the U.S. Federal Reserve has decided to grant foreign central banks more access to U.S. dollars by allowing them to trade their holdings of U.S. Treasury securities for dollar loans. The Feds said this would provide the U.S. with a temporary alternative source of dollars aside from sales of securities in the open market.
However, there remain some potential problems for gold. Three of the largest gold refineries in the world have suspended their production in Switzerland which limits the physical supply of gold. Another problem is that Russia has decided to stop purchases of gold starting April 1.
In a related development, the holdings of the largest gold-backed exchange-traded fund in the world SPDR Holdings increased by 0.3% yesterday which indicates investors’ interest in the yellow metal.