Fundamental Comment

Gold resumes rebound after Fed’s unprecedented measures

Gold resumes rebound after Fed’s unprecedented measures

Gold resumed its rebound for a third straight session on Tuesday, after recording the biggest daily gain yesterday, as the Federal Reserve's massive measures contributed to major changes in global markets.

As of 07:44 GMT, spot gold hovered around $1,599.45 an ounce, where the precious metal hit the highest level today at $1,603.80, the highest level since March 13.

Gold extended its rise for a third consecutive session on Tuesday, hitting a peak of $1,611.32 an ounce, as markets currently experiencing something extremely rare circumstances in the gold market that is resulting in unseen liquidity conditions.

A breakdown in XAU EFP (exchange for physical), which is the difference between CME futures and OTC spot, because refineries are shutting down and market-makers who had short EFP positions have blown-up. This has caused a blow out in spreads and some of peers in the market have stopped pricing altogether.

Gold also took advantage of a 1.57% drop in the dollar index to 101.60, joining gains in stocks that surpassed 5% in European benchmark Euro Stoxx 600.

Investors have recently turned to a policy of "selling everything and keeping liquidity" amid fears of increased closures around the world due to the coronavirus outbreak, despite continued efforts by governments and central banks to reduce its negative impact on their economies.

The yellow metal also posted the largest daily gains in based on data from 1984, and the largest percentage increase since 2009, when it added $83 by the end of yesterday's session.

The rise in the precious metal follows unprecedented measures by the Federal Reserve to support the economy, which is suffering from the coronavirus to stop the exodus of investors towards liquidity.

The Federal Reserve has pledged to launch a series of programs aimed at helping markets operate more efficiently in the wake of the Corona crisis, primarily the purchase of unlimited assets.

The Fed said on Monday it would set up three new lending facilities that will save up to $300 billion by buying corporate bonds, buying a wider range of municipal bonds, and buying asset-backed securities.

As for the development of the respiratory-damaging virus, the global number of infections has jumped by more than 350,000 while it claimed nearly 15,000 lives.

As for other precious metals, silver rose 3.63 percent to $13.76 an ounce, touching the highest level since March 17 at 14.16.

Palladium advanced by 10.80 percent to trade at $1,725 an ounce, while platinum went in the same direction by edging up by 5.96 percent at $664.85.

Share Article