Wishful thinking. That’s how Angel Gurría, secretary general of the Organisation for Economic Co-operation and Development (OECD), responded to any prospect of a swift economic recovery from the coronavirus pandemic. But the scale of the impact on the global economy – as well as our daily lives – has been matched by the scale of the financial response.
The domestic gold price increased by 4.1% in February m-o-m and 8.4% higher than the end of 2019. The rising gold price and higher volatility in the market lured investors towards gold ETFs.
The coronavirus (COVID-19) outbreak supported demand for gold as a safe-haven asset as stocks and commodities fell sharply. Physical gold demand faltered domestically due to COVID-19 and seasonality factors.
The US Federal Reserve (Fed) announced an emergency 50bp rate cut yesterday, bringing the Fed funds rate down to a 1-1.25% range, in response to ongoing concerns about the potential impact of the coronavirus outbreak to the global economy. Treasury bond rates followed suit, with the 10-year note hovering 1% at the time of writing – an all-time historical low
The stock market embraced the weakest one-week performance since the financial crisis last week on the back of growing concerns of the continued spread of the coronavirus across the globe. Despite the risk off-moves, gold was lower by more than 3% last week, which is historically unusual during these types of movements. There are a few potential reasons for the weakness.
