The prices of gold recovered on Wednesday after a major drop yesterday as U.S. President Donald Trump proposed an economic stimulus package to soften the impact of the coronavirus epidemic on the American economy. Trump’s proposal, though delayed, lowered risk appetite.
U.S. gold futures went down by 0.2% to $1,656.70 an ounce. Spot gold prices, which fell by almost 2% during the previous session, increased today by 0.4% to $1,656.37 an ounce as of 0242 GMT on hopes for economic stimulus measures.
Trump’s proposal aims to shield Americans’ paychecks and the economy from the COVID-19 epidemic. Its central feature is payroll tax relief through the end of 2010 which is estimated to cost around $700 billion. It is expected to face bipartisan opposition.
Other major economies are considering a stimulus package of their own. British Finance Minister Rishi Sunak pledged billions of pounds to minimize the economic impact of the outbreak. Japan has issued its second package amounting to around $4 billion to support small and mid-sized businesses.
Major central banks are also working to reduce the impact of the outbreak. The U.S. Federal Reserve made an emergency interest cut last week and is still expected to make another cut in its policy meeting next week. In the EU, 27 leaders will hold a conference to discuss coronavirus countermeasures with European Central Bank president Christine Lagarde. The markets are also anticipating the Bank of England to implement a rate cut on March 26.
The COVID-19 epidemic has already infected more than 116,000 around the world. It has again pushed the U.S. dollar down against a basket of rival currencies. The benchmark U.S. 10-year Treasury yields, Wall Street futures and the Asian stock market all drifted lower today.
According to CMC Markets analyst Margaret Yang Yan, the decline in the value of the dollar and U.S. Treasury yields both further supported the yellow metal.
Meanwhile, the holdings of SPDR Gold Trust, the largest gold-backed exchange-traded fund in the world, dropped by 0.2% yesterday to 962.03 tones.