Gold futures climbed back on Tuesday, for the first time in six sessions when the US Federal Reserve announced that they were setting up a convenient lending channel to help US businesses overcome short-term debt, an important field of the market that froze during the COVID-19 outbreak, MarketWatch reported.
The Fed on Tuesday set up a commercial financing channel to improve liquidity and provide short-term funding to businesses that are short of cash due to trade disruptions and travel by efforts to combat the COVID-19 epidemic. In a statement, the Fed said they were working to provide credit “supporting households, businesses, and jobs in the economy.”
“The latest Fed move and the outlook for salvage currencies have provided support for gold,” said Edward Moya, senior market analyst at Oanda. “Interest rates are close to zero, a massive stimulus package, along with a financial response including direct payments and tax postponement, which will continue to boost gold.”
The administration of US President Donald Trump is supporting an $ 850 billion fiscal stimulus package related to tax cuts and support to airlines, the reports were published.
At the end of the session on Tuesday, the gold contract delivered in April jumped 39.30 USD (equivalent to 2.9%) to 1,525.80 USD/oz.
According to CNBC, also on Tuesday, spot gold contract plus 1.5% to 1,536.62 USD/oz.
“The recent sell-off in gold comes from cash scrambling after growing liquidity concerns show that the disruption in the financing market will not disappear despite recent Fed moves.” Mr. Moya shared. He predicted that “gold will restore the need for a safe haven as the global storm of fiscal and monetary stimulus is expanding rapidly.”
In a surprise move on Sunday (March 15), the Fed lowered interest rates to zero and took other urgent steps to strengthen the economy, which has been sharply affected by the COVID-19 epidemic.
However, the Fed’s actions have not been able to erase the decline in the stock market, causing investors to sell gold to get cash, analysts said. The Dow Jones index “lost” 3,000 points on Monday (March 16), but US stock indexes climbed back on Tuesday when gold contracts closed.
Some data in the US is beginning to show the impact of the COVID-19 epidemic on the economy. Retail sales dropped by 0.5% last month, the sharpest decline in a year. Meanwhile, the industrial output showed strength before the epidemic outbreak, with data from the Fed shows a 0.6% rise in February 2020.
Among the metals on the Comex, the silver contract delivered in May decreased by 2.5% to 12,495 USD/oz. May contract for contract dropped 3.3% to 2,3135 USD/lb. Palladium contracts for June delivery fell 0.3% to US $ 1,509.60/oz.
Meanwhile, the platinum contract delivered in April increased by 1.2% to 665.30 USD/oz.