March 3, 2020 / 3:27 AM / a month ago

PRECIOUS-Gold gains on hopes of rate cuts by global central banks

(Adds graphic, updates prices)

* Markets price in a 50 bp rate cut by Fed

* Focus on G7 conference call on virus response

* GRAPHIC-2020 asset returns: tmsnrt.rs/2jvdmXl

By K. Sathya Narayanan

March 3 (Reuters) - Gold prices rose on Tuesday as expectations grew for interest rate cuts by major central banks to limit the economic fallout from the fast-spreading coronavirus.

Spot gold climbed by 0.4% to $1,596.61 per ounce as of 0725 GMT, after a 0.4% gain on Monday. U.S. gold futures advanced 0.1% to $1,597.10.

Both U.S. Federal Reserve Chairman Jerome Powell and European Central Bank (ECB) President Christine Lagarde have hinted at action in recent days to cushion the virus impact.

“Due to the coronavirus central banks are in a hurry to make fresh cuts and that is making ground for gold,” said Vandana Bharti, assistant vice-president of commodity research at SMC Comtrade.

“We were expecting a Fed rate cut in the second half of 2020 but we may see one in the first half.”

Lower interest rates reduce the opportunity cost of holding non-yielding bullion.

Traders on Monday piled into bets that the Fed will deliver a big dose of stimulus starting this month amid growing concerns over the economic impact of the epidemic.

April Fed funds rate futures imply a 0.50 percentage point cut by the U.S. central bank.

Expectations for aggressive monetary policy easing also supported global equities, while the dollar held close to a 1-1/2-month low hit in the previous session.

Gold is moving along with equities as investors re-establish positions after liquidating them last week to meet margin calls in other assets, said Jeffrey Halley, a senior market analyst at OANDA, adding that lower U.S. Treasury yields also supported the metal.

Benchmark U.S. 10-year Treasury yields hovered close to record lows touched in the previous session.

Meanwhile, data released on Monday showed U.S. factory manufacturing activity slowed last month as new orders contracted, reflecting worries about supply chain disruptions due to the virus and underscoring the need for a rate cut.

Investors are waiting for the G7 conference call later in the day, where finance ministers and central bank governors will discuss measures to deal with the epidemic and its economic impact.

On the technical front, spot gold may bounce towards $1,631 per ounce, Reuters technical analyst Wang Tao said, adding that support was at $1,584 per ounce and a break below that could cause a fall to $1,565.

Among other precious metals, palladium slipped 0.5% to $2,510.67 per ounce, while platinum rose 0.9% to $867.87. Silver was up 0.4% at $16.79 per ounce.

Reporting by K. Sathya Narayanan in Bengaluru; Editing by Subhranshu Sahu

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