Metals Stocks: Gold bounces sharply higher after biggest daily drop in nearly 7 years

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Gold futures were rebounding Monday morning after the precious metal saw the sharpest weekly drop since 2013, with central banks promising to act appropriately to mitigate the effect of a viral outbreak that is expected to hurt global economies and supply chains.

Bank of Japan Gov. Haruhiko Kuroda said the central bank would take steps to steady markets, and bolster liquidity through short-term lending operations and asset purchases. On Friday, Fed Chairman Jerome Powell issued a rare, unscheduled statement, emphasizing the central bank’s intention to act appropriately to address the risks posed by the coronavirus.

A second death from the virus in the U.S., has raised fears of a wider spread of the disease domestically and investors are starting to believe that the Fed and other central banks will act to tamp down expected economic shocks from COVID-19, the infectious disease that originated in Wuhan, China late last year and has rapidly spread across the globe.

The global death toll from the illness stands at about 3,000, and deaths in China stand at 2,900, according to recent reports.

President Donald Trump is scheduled to meet Monday at the White House with executives from the pharmaceutical industry.

Against that backdrop, gold is popping higher after being sold amid an intense stock selloff on Friday, with investors speculating that bullion was registering losses as investors looked to raise cash. Gold had enjoyed a big bounce amid growing uncertainties around the infectious disease.

At last check, April delivery GCJ20, +2.17%  on Comex dropped was gaining $36.40, or 2.3%, at $1,603.10 an ounce, after falling nearly 5% on Friday. The metal last week also booked a weekly slide of about 5%, the sharpest decline since the week ending Nov. 11, 2016. Still, gold is up 5% so far this year, according to FactSet data based on the most-active contracts.

May silver SIK20, +1.69%, meanwhile, dropped rose 22 cents, or 1.4%, to $16.675 an ounce, after registering a 7% drop on Friday, which contributed to a weekly skid of about 11.6%. The white metal marked its sharpest weekly slide since the period ended April 19, 2013. Silver is down 6.8% so far this year.

“A crash or another wave of selloff will be there if gold trades below $1590,” wrote Chintan Karnani, chief market analyst at Insignia Consultants, in a Monday research report. “If gold does not fall below $1,590…then it will rise to $1636.80 and $1653.30,” he wrote.

Read: There’s a simple reason that gold is falling along with coronavirus-afflicted global stocks

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