US, WASHINGTON (NEWS OBSERVATORY) — Market fluctuations caused by coronavirus and expectations of lower interest rates stimulate demand for gold, Bloomberg writes.
Net inflows to gold-backed exchange traded funds (ETFs) exceeded 55 tons in three days on Tuesday, preliminary estimates by Bloomberg showed. This represents almost a third of the total inflow since the beginning of the year.
Gold, seen as a defensive asset, has risen in price as central banks relax their monetary policy to tackle the effects of coronavirus. Lower rates lower the opportunity cost of owning gold.
Last week, the US Federal Reserve announced an emergency rate cut of 50 basis points in an attempt to counter the growing threat of COVID-19.
Nevertheless, the likelihood of a recession in the United States over the next 12 months exceeded 50%, experts at Bloomberg Economics warned. It is expected that the US central bank will lower rates again next week, and demand for gold can grow even more.
Gold went up on Wednesday after falling prices during the previous session, as doubts about the stimulus package proposed by US President Donald Trump to mitigate the economic impact of the virus curbed the risk appetite.
On Tuesday, the White House and Congress held talks on measures to support the US economy, but Trump’s plan has not yet received support in Congress, writes Reuters.
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