Gold Mixed After Wall Street’s Rise; Return to 7-Year Highs Likely

Feb 27, 2020 | Gold – Gold prices were mixed on Wednesday after a rebound in U.S. stocks slowed fund flows into safe havens, but analysts said the yellow metal was within target of returning to seven-year highs due to fears around the coronavirus crisis and expectations of U.S. rate cuts.

Gold futures for April delivery on New York’s COMEX were down $5.55, or 0.53 at $1,644.45 by 12:28 PM ET (17:28 GMT).

The contract fell 1.6% Tuesday, its most in a day since October, on what analysts described as a breather in a market that had tacked on $115 over a three-week run to seven-year highs of nearly $1,700.

Spot gold, which tracks live trades in bullion was up $7.41, or 0.4%, at $1,642.49.

Holdings in the SPDR Gold Trust (P:GLD), the world’s largest gold-backed exchange-traded fund, rose 0.7% to 940.09 metric tons at Tuesday’s settlement, data showed.

“Gold is softer on the session, but the longer-term outlook for higher prices remains firmly in place,” said Ed Moya, analyst at New York-based OANDA.

“Gold will see support from rising expectations the virus impact to global growth will force the Fed (to cut rates) as deflationary pressures will rise. Even if virus jitters ease, the bond market will force the Fed to cut rates no matter what.”

The main U.S. stock indexes were off their morning highs after Brazil reported its first coronavirus case, the first in Latin America, amid a rash of new infections seen outside of China that run from Iran to South Korea. Wall Street suffered its worst one-day loss in two years this week as the health authorities reported that it was a matter of when, not if, the virus becomes a U.S. pandemic.

Bets that the Federal Reserve will be forced into another round of protective rate cuts were among the factors for gold’s recent rise to seven-year highs. The Fed just ended an easing cycle in December.

By Barani Krishnan

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