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Monday, June 01, 2020

Gold rises 1% on flight to safety driven by pandemic fears

Gold is considered an attractive investment during times of political or economic uncertainty. It is highly sensitive to interest rates, as lower rates reduce the opportunity cost of holding the non-yielding bullion.

By: Reuters | Bengaluru | Published: April 1, 2020 12:21:30 pm
Four arrested from Bengaluru-Hyderabad highway for smuggling Rs 1.38 crore worth gold Limiting physical gold’s supply, three of the world’s largest gold refineries said they had suspended production in Switzerland for at least a week after local authorities ordered the closure of non-essential industry.

Gold rose on Wednesday as fears over a worsening coronavirus pandemic triggered a flight to safety, with expectations of further monetary easing by central banks adding support.

Spot gold rose 1 percent to $1,587.31 per ounce by 0605 GMT, having slumped 3.1 percent in the previous session on a strong dollar. US gold futures were up 0.3 percent at $1,600.70.

“Investors may be shifting to gold for safety,” said CMC Markets analyst Margaret Yang Yan, who saw the rebound spurred by President Donald Trump’s remarks that the next two weeks of the pandemic could be painful for the United States.

“The ramification of easing monetary policy cycle and trillion dollars of stimulus means the market will be full of liquidity and ample supply of paper money in months, quarters or years to come, and that’s definitely supporting gold’s rally amid very limited supply (of physical bullion).”

Gold is considered an attractive investment during times of political or economic uncertainty. It is highly sensitive to interest rates, as lower rates reduce the opportunity cost of holding the non-yielding bullion.

The Federal Reserve on Tuesday broadened the ability of dozens of foreign central banks to access US dollars during the crisis by allowing them to exchange their holdings of US Treasury securities for overnight dollar loans.

Limiting physical gold’s supply, three of the world’s largest gold refineries said they had suspended production in Switzerland for at least a week after local authorities ordered the closure of non-essential industry.

Russia has also stopped gold purchases from April 1.

In equities, Asian stocks clung to gains, supported by positive China PMI data, but risks remain large as the pandemic rattles the underpinnings of the global economy.

“The tentative signs of improvement in data from China has given some renewed confidence to the region… expect that to support both equity and gold prices in Asia this morning,” said Jeffrey Halley, a senior market analyst at OANDA.

Holdings in SPDR Gold Trust, the world’s largest gold-backed exchange-traded fund, rose 0.3 percent to 967 tonnes on Tuesday.

Palladium slid 2.4 percent to $2,295.63 per ounce, platinum fell 0.5 percent to $718.92 and silver shed 0.2 percent to $13.94.

Here’s a quick Coronavirus guide from Express Explained to keep you updated: What can cause a COVID-19 patient to relapse after recovery? | COVID-19 lockdown has cleaned up the air, but this may not be good news. Here’s why | Can alternative medicine work against the coronavirus? | A five-minute test for COVID-19 has been readied, India may get it too | How India is building up defence during lockdown | Why only a fraction of those with coronavirus suffer acutely | How do healthcare workers protect themselves from getting infected? | What does it take to set up isolation wards?

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