Gold News

Gold Price Retreats as Equities Bounce Despite Covid-19 Crisis, Trump Attacks 'Pathetic Fed'

GOLD PRICES fell hard Tuesday as world stock markets bounced from yesterday's plunge and government bond prices also retreated, edging long-term interest rates sharply higher from Monday's record lows amid the worsening coronavirus outbreak.
 
US President Donald Trump meantime demanded yet more rate cuts and QE from the Federal Reserve, ahead of a press conference at which he promised overnight to announce tax cuts and state aid for workers paid by the hour.
 
The government in Japan today approved a bill enabling Shinzo Abe to declare a "worst case" state of emergency after the Prime Minister was criticized for failing to respond quickly enough to the outbreak of Covid-19 in the world No.3 economy – "most likely" far worse than official estimates say, according to the National Institute of Infectious Diseases.
 
No.3 European Union economy Italy meantime began its first day of near-total shutdown after Prime Minister Giuseppe Conte extended Sunday's restrictions on north-eastern regionas to the whole country.
 
"All forms of gathering in places open to the public are prohibited...[with] all organized events...including those of a cultural, recreational, sports or religious character suspended...[whether] in public or private...indoors or outdoors."
 
Milan's FTSE MIB stock index rallied just 0.5% by mid-afternoon after losing over a tenth of its value on 'Black Monday'.
 
European stock markets as a whole halved their earlier 4% bounce from yesterday's plunge to 14-month lows on the EuroStoxx 600 index.
 
Gold priced in the Euro touched a 1-week low at €1452 per ounce, down €100 from late-February's new record high – and down from yesterday's spike to €1500 – as bond yields rose steeply before slipping back.
 
With 10-year German Bund yields whipping from -0.90% to -0.71% and then -0.80% – formerly the record low of last August's global growth panic – yields on US Treasury also swung higher only to retreat.
 
Real 10-year rates, adjusted for inflation expectations, currently show a near-record relationship with gold prices, recording an r-squared of 93.2% across the last 52 weeks.
 
Chart of real 10-year US rates vs. gold. Source: St.Louis Fed
 
Back in Washington, "Our pathetic, slow moving Federal Reserve, headed by Jay Powell, who raised rates too fast and lowered too late, should get our Fed Rate down to the levels of our competitor nations," said Trump ahead of Tuesday's New York open.
 
"They now have as much as a two-point advantage, with even bigger currency help. Also, stimulate!"
 
Trump is also set to announce taxpayer aid for the heavily-indebted US shale oil sector after crude oil sank at its fastest pace since January 1991, bouncing 6% on Tuesday.
 
Copper meantime rallied 2.8% from Monday's plunge to the cheapest since December 2016, down by 15 cents in the Dollar from January.

Adrian Ash is director of research at BullionVault, the world-leading physical gold, silver and platinum market for private investors online. Formerly head of editorial at London's top publisher of private-investment advice, he was City correspondent for The Daily Reckoning from 2003 to 2008, and he has now been researching and writing daily analysis of precious metals and the wider financial markets for over 20 years. A frequent guest on BBC radio and television, Adrian is regularly quoted by the Financial Times, MarketWatch and many other respected news outlets, and his views from inside the bullion market have been sought by the Economist magazine, CNBC, Bloomberg, Germany's Handelsblatt and FAZ, plus Italy's Il Sole 24 Ore.

See the full archive of Adrian Ash articles on GoldNews.

Please Note: All articles published here are to inform your thinking, not lead it. Only you can decide the best place for your money, and any decision you make will put your money at risk. Information or data included here may have already been overtaken by events – and must be verified elsewhere – should you choose to act on it. Please review our Terms & Conditions for accessing Gold News.

Follow Us

Facebook Youtube Twitter LinkedIn

 

 

Market Fundamentals