Gold bounces higher as stocks react to spread of coronavirus

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Gold bounces higher as stocks react to spread of coronavirus

California declares state of emergency as COVID-19 spreads

Gold futures headed higher on Thursday, supported by weakness in stocks and a slide in government bond yields due to worries about the COVID-19 epidemic.

Bullion is attracting haven bids as California declared a state of emergency, and more cases of the epidemic were cropping up globally, including in Australia and South Korea, making containment of the disease increasingly challenging.


Gold looks like one of the most attractive assets in this global environment, With US rates likely heading towards the zero lower bound., wrote Stephen Innes, chief market strategist at AxiCorp, in a Thursday research note.

This should mean that both retail and institutional investors, portfolio allocations in gold will rise exponentially, he said.


Gold for April delivery GCJ20, 1.156% on Comex rose $20.30, or 1.2%, at $1,663.30 an ounce, after settling off less than 0.1% on Wednesday. May silver SIK20, 0.400% added 8.9 cents, or 0.5%, to trade at $17.335 an ounce.


Recent history shows that some days traders and investors are less concerned about the coronavirus outbreak, and then the next day they are more concerned. Look for continued vacillating markets as the Covid-19 situation plays out, said Jim Wyckoff, senior analyst at Kitco.com. It’s now looking more likely that the event will not be a short-term situation, but instead one that will play out over several months, or longer.


The benchmark U.S. 10-year Treasury note yield fell below to a record low this, and remains below that level, said Wyckoff, in a daily note. This has prompted keen concern among long-term market watchers that a U.S. and /or global economic recession looms, including the prospect of debilitating consumer and commercial price deflation.

All of the above are bearish for stocks and most commodities, and bullish for safe-haven assets like gold, the U.S. dollar and U.S. Treasuries, he said.


(Sources WSJ, KitCo, Market Watch)


 

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