Gold rate today drops amid rush for cash

Andrew Cummings
March 26, 2020

Goldman Sachs has told investors to continue buying gold as the precious metal is the only asset that will protect them as central banks restart their money printing policies in a bid to fight off an economic catastrophe. The Fed also set up programs to ensure credit flows to corporations as well as state governments. Goldman also highlighted the rise in deficits in developed economies, as well as "issues around the sustainability" of European monetary union, according to a note. "Accordingly, we are likely at an inflection point where "fear"-driven purchases will begin to dominate liquidity-driven selling pressure, as it did in November 2008".

Gold prices fell on Monday as investors stockpiled cash, with a rising numbers of coronavirus-led national lockdowns threatening to overshadow stimulus measures from global central banks to combat the economic damage. The Bloomberg Dollar Spot Index dropped after hitting a record a day earlier.

"So far, $1,450 has provided a floor, but the trend is against it and sellers aren't easing up". Late on Tuesday, after NY futures shot to the highest premium to the spot price in four decades, CME Group said it would launch a new futures contract under which 400-ounce bars would also be deliverable, helping ease tightness.

Bullion investors are also weighing plans for massive stimulus worldwide, including unprecedented moves by the Federal Reserve to backstop large swaths of the financial system through unlimited quantitative easing.

But open interest in the April contract dropped nearly 30% on Wednesday, indicating a small amount of short-covering and as investors rolled positions forward, according to David Govett, head of precious metals trading at Marex Spectron. "People should have gold and this may be a good time to increase holdings in gold - in fact I'm thinking that myself".

Gold prices, in global markets, had surged over 5% on Tuesday - the most in more than a decade - as the precious metal continued to experience big swings in its price movement. South Africa, which accounts for 75 per cent of the world's platinum and 38% of palladium supply, said it will close its mines for 21 days as part of a nationwide lockdown.

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