The Asian gold market was extremely volatile in early trading on Monday, with gold falling below $1,530 an ounce, down more than $50 from the day’s high. In the early hours of Monday Beijing time, the federal reserve cut interest rates in an emergency and resumed QE, the market trend became extremely volatile.
Spot gold has just fallen sharply in the short term, falling below the $1,530 / oz mark and as low as $1,523.68 / oz.
Spurred on by the federal reserve’s emergency interest rate cut, spot gold jumped more than $30 a week and rose as high as $1,575.10 an ounce.
On Sunday afternoon, the federal reserve abruptly cut interest rates to nearly zero and launched a massive $700 billion quantitative easing program to deal with the impact of a new coronavirus on the U.S. economy.
In response to the stock market rout, the federal reserve cut interest rates by an emergency 50 basis points on March 3, an unusually intense rate cut. After the 2008 financial crisis, the federal reserve cut interest rates all the way to the ultra-low level of 0-0.25% to save the economy, and then continued its zero interest rate policy for seven years.
The federal reserve statement said the new outbreak has caused social and economic damage in many countries, including the United States. The global financial environment has been significantly affected. The rate cut will help support the us economy, stabilise the job market and maintain the inflation target.
In conjunction with the rate cut, the fed also announced a massive $700 billion program of quantitative easing, which included buying back at least $500 billion in Treasury bonds within months and adding at least $200 billion in mortgage-backed securities. It is also unusual. After the 2008 financial crisis, the fed launched at least three rounds of quantitative easing.
Gold fell as much as 4.5 percent to as low as $1504.40 an ounce on Friday as investors favored cash and continued to sell to meet margin calls in other markets.
Last week’s heavy selling of spot gold, which hit a multi-year high of $1703.09 an ounce at the start of the week, sent the market tumbling for the fifth day in a row. On the weekly chart, gold ended down $1,529.81 an ounce on a long negative note, down $144.89, or 8.65 percent, for the week.
“Gold has again been hit by liquidation as the market has collapsed,” said Adrian Day, chairman and chief executive of Adrian Day Asset Management, referring to last week’s fall in gold prices.
The leading financial news website Economies.com wrote on Friday that gold was under strong bearish pressure, falling below $1,555.00 an ounce and closing below that level.
Once gold is confirmed below $1508.86 an ounce, it will continue to be bearish to hit its next bearish target of $1,453.10 an ounce, paving the way for gold to turn negative in the short to medium term, according to Economies.com. $1508.86 an ounce is the most important support line for gold in the short term.
Daniel Pavilions, the senior commodities broker at RJO Futures, expects further weakness in the short term before gold rebounds.
Andrew Hecht, a writer for Seeking Alpha precious metals, said he expected gold prices to “go up and down” in an “extreme environment.”