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RBC's Gero: investors buying gold again after Friday 'bruising'

Kitco News

Gold futures have been boosted by rising expectations of a Federal Reserve rate cut, further declines in Treasury yields and the metal’s safe-haven status during times of uncertainty, such as the current coronavirus outbreak, said George Gero, managing director with RBC Wealth Management. The metal bounced Monday after Friday’s “bruising” sell-off, when traders were trying to raise cash, some of it because of margin-related selling, Gero said. Now, however, gold futures are attempting to claim $1,600 again on a day of “less margin calls, start of a new month and expectations of Fed moves,” Gero said. He explained that lower interest rates “makes holding gold more appealing and reduces opportunity costs. Fed expectations of a cut by [the] March 18 meeting are rising, and gold’s appeal as a safe haven is still strong.” Not only are there expectations of further coronavirus problems, but markets are mindful of potential political headlines in the U.S., as well as worries about the Middle East and euro zone. “In fact, wherever investors look, they see the problems,” thus attracting gold buyers, Gero said. “Look for gold [to be in] a somewhat lower trading range for now at $1,580-$1,650 again and don’t count out gold with global stock volatility probably upcoming.” Just before 9 a.m. EST, Comex April gold was $27.80 an ounce higher at $1,594.50 after bottoming Friday at $1,564.

By Allen Sykora of Kitco News; asykora@kitco.com

 

BMO: Gold bounces as markets anticipate looser monetary policy

Monday March 2, 2020 08:35

Gold bounced early Monday from a sell-off late last week, with participants in a range of markets anticipating central bankers will cut interest rates to try to offset damage to the global economy from the coronavirus outbreak. As of 8:23 a.m. EST, spot gold was $13 higher to $1,598.50 an ounce. Central bankers in a number of nations, including the U.S. and Japan, have hinted at possible policy action to prop up the economy. “Gold has recovered back towards $1,600/oz in Monday trading, and with global central-bank policy set to ease further, we would expect further support over the near term,” said BMO Capital Markets. Meanwhile, the Canadian bank’s economics team has downwardly revised the base case for its forecast of global economic growth this year as a result of the virus outbreak.” We now anticipate just 2.4% this year, compared to 2.6% previously and 2.8% in 2019,” BMO said. “We had already made significant downgrades to China, but U.S. GDP [gross-domestic-product growth] is now expected to be 1.5% this year (previously 1.8%). However, our views for 2021 have been increased with the possibility that the now likely near-term rate cuts will be reversed by early next year.”

By Allen Sykora of Kitco News; asykora@kitco.com

 

BBH: rate cuts won't offset impact of virus on economy

Monday March 2, 2020 08:35

Market hopes for coordinated global economic stimulus prompted some optimism in financial markets as a new week gets under way, but Brown Brothers Harriman downplayed those market expectations. Asian stock bourses traded higher, and European markets got off to “blistering start,” BBH said. U.S. stock-futures have been on both sides of unchanged since electronic screen trading opened late Sunday. BBH noted that Federal Reserve Chair Jerome Powell made a statement Friday hinting at a possible action, saying the virus poses an economic threat and policymakers would “act as appropriate to support the economy.” Officials with the Bank of Japan and Bank of England followed with pledges to act as needed, although the European Central Bank has not done the same, BBH said. “We downplay this bout of optimism as we believe that the prospects of potential Fed or even globally coordinated easing are not enough to offset the growing headwinds to the global economy,” BBH said. “Until the scope of the virus outbreak is known, we see no reason to get optimistic on global growth prospects.” Nevertheless, BBH said, the U.S. dollar eased early Monday as Federal Reserve rate-cut expectations picked up.

By Allen Sykora of Kitco News; asykora@kitco.com

 

FXTM: rate cuts won’t fix virus impact on economy

Monday March 2, 2020 08:35

Hussein Sayed, chief market strategist at FXTM, said loosening of central-bank monetary policy likely would do little to counter the impact of the coronavirus on the global economy. Financial markets in a number of nations stabilized early Monday on hopes that central bankers would come to the rescue. “The crisis we are currently facing is neither a financial nor a trade one,” Sayed said. “It’s a health crisis. Let’s assume the Fed cut interest rates to zero, the ECB [European Central Bank] moved deeper into negative territory and the BOJ [Bank of Japan] resumed its asset-purchase program. In addition, central banks became more creative with their quantitative-easing programs. Will these measures encourage you to buy a new flat, a new car or even a new iPhone? Are you more confident in taking a vacation trip? Are you likely to consider expanding your business given the cheap liquidity? Most likely, the answer is no.” The crisis facing the global economy is not the result of a lack of liquidity but the spread of an illness around the world, and “no amount of monetary stimulus will return life to normal.”

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