Gold Lifted Amid Skepticism Over US Economic Stimulus

Investors were unimpressed so far by a stimulus package proposed by US President Donald Trump to address the economic fallout from the rapidly spreading coronavirus outbreak.

On Tuesday, the White House and Congress negotiated measures to support the US economy. President Trump proposed a temporary elimination of payroll taxes that could cost nearly $700 billion.

Critics of the idea point out that payroll tax suspension would not help unemployed people and would not provide substantial relief for workers. On Tuesday, speaking at the White House during a meeting with insurance executives, Trump said the administration will provide assistance to cruise lines and airlines.

The CME Fedwatch tool is currently showing a 90.8% chance of a 75 basis point rate cut at the March 18th Federal Reserve meeting. Markets are also expecting an easing of monetary policy from the European Central Bank (ECB) at its meeting this Thursday. Earlier on Wednesday, the Bank of England (BOE) cut UK interest rates from 0.75% to 0.25% at an unscheduled meeting.

Data from Johns Hopkins University showed that as of Tuesday evening, there were at least 1,020 cases in the US. Earlier in March the university indicated that the number of coronavirus cases worldwide has passed 100,000. News on Monday that the entire country of Italy has been put on lockdown sent shockwaves through the markets. Reports on Wednesday indicate a worsening situation in Italy and Japan.

Looking at the gold daily chart we can see that the 50 period moving average formed support below. Bulls now eye the recent high of $1,703 reached on Monday, which marks the highest price level since December of 2012.

By Dan Blystone, Scandinavian Capital Markets