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Commerzbank: gold prices to profit from 'more fiat money than ever'

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Gold should benefit as governments pump money into their economies to combat the COVID-19 virus, although physical demand in key consuming nation India may slump during the next few weeks due to safety measures instituted there, Commerzbank said. Gold on Monday regained $1,600 per ounce mark for the first time in nearly two weeks, before falling back on Wednesday. Central banks, including the U.S. Federal Reserve and European Central Bank, “have thrown the monetary-policy floodgates wide open,” Commerzbank said in a research note. Senators and the Trump administration have agreed on a $2 trillion rescue package, and a package is expected from Germany’s Bundestag as well. “As a result, the coming months will see more fiat money than ever before flooding the markets,” Commerzbank said. “Gold should profit from this as more of it cannot be conjured up at the push of a button.” However, Indian buying likely will slump in the near term due to a lockdown in the country in an attempt to slow the virus. “The Indian gold jewelry industry expects this to drive demand down by 30% year-on-year,” Commerzbank said. “If this proves accurate, gold demand in India would plunge to its lowest level in 25 years. So despite its latest surge, there are probably limits to the upside potential for the gold price.”

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