Gold hurt by other falling markets

GOLD this week has been trading lower and closing lower for the last three days. It saw a large decline of more than US$60 an ounce yesterday. The global equity meltdown and treasury yields hitting all-time lows had resulted in concerns that large hedge funds and tactical players would need cash.

The slump in stock markets had heightened concerns that these traders might need to liquidate long gold positions to meet margin calls. Precious metals also retreated on the recent strength of the US dollar. Investors had scaled back on accumulating gold as the Trump administration was reported to be preparing a package of economic measures to cushion the impact of Covid-19.

The Bank of England eased monetary policy by cutting its key rate by 50bps to 0.25 per cent. The UK Chancellor of the Exchequer announced additional supportive fiscal measures. The European Central Bank also proposed measures which are also expected to boost stimulus and which would be supportive of gold. The spread of the coronavirus to many countries has heightened concerns that global economic growth will be affected and demand for precious metals will be reduced.