A cacophony of instability has hit financial markets at the start of a new trading week, but with central banks, led by the Federal Reserve, dropping interest rates to zero, analysts now say that the only place investors can turn to is gold.
At the beginning of the Asian trading session, the gold market started Sunday evening strong but volatile; April gold futures last traded at $1,559.50 an ounce, up 2.8% on the day.
Meanwhile, the S&P 500 Index opened the Asian session down 4.77% to their daily trading limit outside the United States.
The moves come after the Federal Reserve surprised markets with a second emergency rate cut in as many weeks. Sunday afternoon, the U.S. Central bank said that it was bringing interest rates to within a target range of 0% to 0.25%.
Some market analysts have described the latest emergency Fed decision as another panic move. Still, expectations of a global recession continue to rise as the coronavirus continues to spread worldwide, prompting nations to effectively shut down.
Economists are now wondering with the Fed’s move, just how bad the global economy will weaken.
“I think the only thing you can own right now is gold,” said Adam Button, managing director at Forexlive.com.
“The deficits are doing to be outrageous,” he added. “During the financial crisis, the government had to bail out the banks, but now because of the impact of the virus, they are going to have to bail out everyone.”
Phillip Streible, chief market strategist at Blue Line Futures, said that he also expects gold prices to push higher; however, he added that the volatility is going to incredible in the next few days.
“Everything is just so fluid. I wouldn’t be surprised to see gold prices up $80 Monday morning. But I also wouldn’t be surprised if prices were unchanged on the day or slightly negative,” he said.
Analysts note that gold continues struggling as crashing equity markets are creating a liquidity crisis for investors. Investors are forced to liquid assets like gold to meet margin calls.
Referenc: Kitco
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