Price of Gold Fundamental Daily Forecast – Rising Rate Cut Expectations Providing Support

Gold prices are up on Monday but holding steady since surging earlier in the session. The market jumped nearly 1 percent early in the day after posting its largest daily decline in nearly seven years on Friday. Gold is being supported by generally calm conditions in the stock market and rising expectations for policy easing by the U.S. Federal Reserve and other central banks.

At 17:05 GMT, April Comex gold is trading $1598.00, up $31.30 or +2.00%.

On Friday, gold was pressured by traders liquidating their holdings amidst a coronavirus-led sell-off across global markets, with gold plunging as much as 4.5%.

Also on Friday, Federal Reserve Chairman Jerome Powell said the U.S. central bank will “act as appropriate” to support the economy on the backdrop of the virus outbreak. Traders read this to mean policymakers are prepared to cut interest rates sooner than expected.

Investors are betting the Federal Reserve will now act aggressively in response to a coming economic slowdown due to the coronavirus outbreak. The Fed Funds market has already priced in a 50 basis point cut at the Fed’s meeting this month, according to CME Fed Watch tool.

Lower interest rates reduce the opportunity cost of holding non-yielding bullion, making gold a more attractive investment.

Gold prices have been trading in an intraday range since the stock market opened steady. Although the rise in stocks has helped underpin prices by stopping the margin call related selling in gold, it’s also helping to cap gains in the precious metal.

Daily Forecast

Gold could get a boost later this week if the rumors about a coordinated rate cut by the major central banks prove to be true. According to the chatter in the marketplace, the major central bankers are discussing making a coordinated rate cut on Wednesday.

U.S. recession fears could also underpin gold prices. While Senior White House officials have attempted to calm market panic over the potential of the virus to trigger a global recession, some on Wall Street are warning about an economic downturn.

Ed Hyman, a widely followed economist on Wall Street, said the outbreak could end up causing a recession in the U.S. and slashed his U.S. GDP forecast to zero growth in the second and third quarters of this year.

A recession would keep further pressure on global rates, making gold more valuable.