May 13, 2020 / 5:06 AM / 18 days ago

PRECIOUS-Gold holds steady ahead of U.S. Fed chairman's speech

 (Updates prices)
    * Powell's speech on current economic issues at 1300 GMT
    * Gold to hover in high-$1,600 to mid-$1,700 handle: Citi
    * For an interactive graphic tracking the global coronavirus
spread, open tmsnrt.rs/3aIRuz7 in an external browser

    By Harshith Aranya
    May 13 (Reuters) - Gold held steady on Wednesday as market
participants stayed away from making big bets ahead of a speech
by Federal Reserve Chairman Jerome Powell amid rising
speculation the United States could one day adopt negative
interest rates.
    Spot gold        was unchanged at $1,702.52 per ounce by
0721 GMT. U.S. gold futures        fell 0.1% to $1,705.90 per
ounce.
    "This kind of indecision (by investors) really has to do
with uncertainty about whether the Fed would be successful with
all this stimulus and a desire for liquidity," DailyFx currency
strategist Ilya Spivak said.
    "Central banks have already deployed a giant wave of
stimulus and are waiting for this lockdown to end to see if that
is enough," Spivak said, adding speculation that the United
States might adopt negative rates will support gold.
    President Donald Trump on Tuesday again urged the U.S.
central bank to adopt negative interest rates. Last week, U.S.
money market instruments started to price in a chance of
negative rates.                        
    Markets are now waiting for Powell's speech at 1300 GMT for
clarity on the health of the U.S. economy.
    "While we do not expect the Fed to go to negative policy
rates, and they still have plenty of other monetary tools at
their disposal ... the front-end curve pricing this phenomenon
may be a bullish gold market tail risk," according to a note
from Citi Research.
    "So even as we see the potential for gold market liquidation
and broad asset market drawdowns in the next 3-6 months, we
think gold trading will still mostly hover in a high-$1,600 to
mid-$1,700 handle."
    Massive stimulus measures support gold as it is used as a
hedge against inflation and currency debasement.
    An estimated $15 trillion worth of stimulus has already been
unleashed by central banks and governments to shield their
economies from the coronavirus pandemic.             
    Underscoring the deeper economic impact of the virus, U.S.
consumer prices dropped by the most since 2008 in April, while
20.5 million Americans lost their jobs in the month - the
deepest fall since the Great Depression.             
    The International Monetary Fund's managing director said it
was "very likely" the Fund would cut global growth forecasts
further as the pandemic was hitting many economies harder than
previously projected.             
    Highlighting investor appetite for the bullion, SPDR Gold
Trust       holdings, the world's largest gold-backed
exchange-traded fund, rose 0.24% to 1,083.66 tonnes on Tuesday.
         
    Palladium        was down 0.4% to $1,852.52 per ounce, while
silver        gained 0.4% to $15.47, and platinum        was up
0.9% to $760.54.

    
 (Reporting by Harshith Aranya and K. Sathya Narayanan in
Bengaluru; Editing by Anil D'Silva and Rashmi Aich)
  
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