Gold started the morning session in Asia on Monday (March 2) with a dramatic jump through the $1,590 barrier, but quickly retreated to a low of $1,575.36 an ounce. But overall, gold has staged a choppy rebound, regaining the $1,600 mark earlier in the day. The rapid spread of the new pneumonia outbreak overseas has stoked fears that gold could regain a safe-haven bid after Friday’s plunge amid a global outbreak of the disease. In addition, the prospect of a new easing cycle by the world’s major central Banks as a sharp fall in us stocks forces the federal reserve to cut interest rates will also be a long-term boon for gold.
Richard Baker, editor of Eureka Miner’s Report, said: “profit-taking, forced long unwinding, and subdued consumer demand in China likely contributed to Comex gold’s decline last week. But he expects gold to be looking for a comeback. Given the growing uncertainty about the impact of the new coronavirus on the us economy and the world, gold is expected to recover to the $1,650 level next. In the next few weeks, gold will move back up to $1,800 an ounce.”
Adrian Day, chairman and chief executive of Adrian Day asset management, also said he expected gold prices to rise because “gold should do well in times of market uncertainty.”
On the other hand, even though the market is betting on more easing by global central Banks, that is good for gold. But analysts also warned that easing expectations by central Banks around the world could also spur a rally, limiting gold’s room for recovery, following the biggest drop in global stocks since the financial crisis.
Ronord-peter Stoeferle, a fund manager at Incrementum AG and author of the annual report on In Gold We Trust, said Gold prices fell as margin calls came In and sentiment and extremely bullish positions In trader commitment reports looked worrisome.
Concerns about the rapid spread of new coronary pneumonia overseas have intensified
A total of 202 new cases, 42 deaths and 141 suspected cases were reported in 31 provinces (autonomous regions and municipalities directly under the central government) and the xinjiang production and construction corps from 0:00 to 24:00 on March 1, according to the national health and fitness commission.
On the same day, 2,837 new cases were cured and discharged from hospital, 8,154 close contacts were released from medical observation, and 255 cases of severe illness were reduced.
The rapid spread of the disease overseas, especially in South Korea, Japan, Italy and Iran, has sparked international concern, even as the spread of the new pneumonia has slowed in China.
By 17:00 on March 1, 58 countries and regions outside China had reported more than 7,000 confirmed cases of new coronary pneumonia, and the death toll was rising, according to the who. South Korea has the highest cumulative number of confirmed cases outside China, with more than 3,700 confirmed as of 4 p.m. on March 1. Meanwhile, Iran and Japan have also been hit hard, with Iran having the highest number of deaths outside China.
Italy is the worst affected country in Europe, with 1,694 confirmed cases as of 2 p.m., March 1. Mexico, Iceland, Nigeria, belarus, New Zealand, Brazil, Lithuania, Monaco, azerbaijan, Ecuador, Ireland and Qatar have all reported their first confirmed cases.
The world health organization (who) has raised its global risk level for a new outbreak of coronary pneumonia from “high” to “very high”, the agency said in Geneva on Thursday. Who experts also stress that this is not to scare people, but to wake up countries to reality and prepare themselves to take responsibility for their own people and the world.
On February 28, ma xiaowei, director of the national health and fitness commission, said that the outbreak of xinguan pneumonia was the fastest, most widespread and most difficult public health emergency since the founding of the People’s Republic of China. Since the outbreak of epidemic, already to the nation and the world economy and the people’s livelihood activities have a significant impact, domestic enterprises delay to return to work, all kinds of extension school starts, published by the weekend of China under the background of the February manufacturing PMI has since low, days after the latest caixin PMI is big also fell to 40.3 in February.
Zhong zhengsheng, chairman of caixin think tank monitor research, commented that the caixin manufacturing PMI in February was the lowest since the survey began in 2004, at 40.3, down from a low of 40.9 during the 2008 financial crisis. A new outbreak of pneumonia swept across the country, disrupting much of the economy and contributing to the decline in manufacturing.
A variety of data show that the outbreak of pneumonia has had a significant impact on the economy, the financial market turmoil is undeniable. U.S. stocks suffered their worst week since the 2008 financial crisis last week as market fears soared, with the s&p 500 down more than 11 percent, the dow down more than 12 percent and the NASDAQ down more than 10 percent. At the same time, both oil and gas prices were hammered last week as the outbreak scare continued to hit risk assets, with U.S. oil down 16% and gulf oil down nearly 14%. In addition, dollar gold is also affected by market sentiment and volatile. The next step is to keep an eye on the global spread of the new pneumonia epidemic, which threatens to send another wave through financial markets.
Risk aversion wave sweeping, a new round of easing cycle?
With global economic activity weighed down by the spread of the outbreak, investors are focusing on whether major central Banks are embarking on another massive easing cycle, especially the possibility that a sharp drop in U.S. stocks will force the federal reserve to cut interest rates.
The latest CME fed watch tool shows that the odds of a 50 basis point rate cut at the fed’s March 18 meeting have soared to 100%.
Goldman sachs economists noted that fed chairman colin Powell’s statement on Friday strongly suggested the fed would cut rates at the March 17-18 FOMC meeting.
Meanwhile, Goldman sachs economists expect the fed to cut rates by 50 basis points at its meeting on March 18, followed by a further 50 basis points in the second quarter for a total of 100 basis points, and expect other G10 central Banks to cut rates as well. Meanwhile, the bank of Canada is expected to cut rates by 100 basis points, the bank of England, the rba, the New Zealand fed, norges bank, the reserve bank of India and the bank of Korea by 50 basis points, and the European central bank and Switzerland by 10 basis points.
Analysts say that if the overall global situation remains the same, let alone gets worse, it could force the fed to cut rates.
In a rare statement last week, the fed pledged to “act appropriately” to support the economy, opening the door to a rate cut at its March 17-18 meeting. Jiantai zhang, chief Asian currency strategist at mizuho bank, said a rate cut in the us would make it more attractive to be long the Hong Kong dollar by pushing down the cost of borrowing against the us dollar.