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James Hyerczyk

Gold futures are trading higher shortly before the regular session opening after rebounding from earlier losses. The fundamental picture today is mixed so the price action is likely related to a technical spot on the daily chart.

Fundamentally, stock market weakness and lower Treasury yields are underpinning prices, but a stronger U.S. Dollar is helping to cap gains. The weaker stock market could actually be limiting gains also if it is encouraging margin-call selling. We just won’t know until we see the whole picture after the U.S. stock market opens at 12:30 GMT.

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At 10:49 GMT, June Comex gold futures are trading $1607.50, up $10.90 or +0.68%. Earlier in the session, the market hit a low of $1576.00.

Foreign Central Banks Getting More Access to Dollars

The U.S. Federal Reserve on Tuesday broadened the ability of dozens of foreign central banks to access U.S. Dollars during the coronavirus crisis by allowing them to exchange their holdings of U.S. Treasury securities for overnight dollar loans.

The new program “should help support the smooth functioning of the U.S. Treasury market by providing an alternative temporary source of U.S. Dollars other than sales of securities in the open market,” the U.S. central bank said, in effect giving central banks with less widely traded currencies or more volatile exchange grates a way to access cash from the Fed.

The move could be particularly important in coming weeks as measures to control the spread of the virus shuts down commerce and potentially leaves companies and countries that do business or borrow in the U.S. currency struggling to stay afloat.

The dollar weakened after the Fed announcement, with more supply of the U.S. currency seen diminishing its value.

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Supply Limited

Limiting physical gold’s supply, three of the world’s largest gold refineries said they had suspended production in Switzerland for at least a week after local authorities ordered the closure of non-essential industry.

Russia Stops Buying Gold

In a sign that it may be running out of cash due to the extremely low crude oil prices, Russia’s central bank announced on Monday that it would stop buying gold starting April 1, but didn’t explain the move. Analysts say Russia already has a lot of gold stashed in reserves and likely doesn’t need more.

Forbes said with gold prices near a seven-year high and international investors clamoring for a safe haven, Russian dealers are probably eager to sell. Bullion has become an extremely popular investment in recent weeks as the coronavirus sows fear through financial markets, but some dealers are having a hard time sourcing gold bars.

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