The recent changes in the economical crisis globally have led to the US Federal Reserve initiating interest rate cut to support the global market. As the global economy becomes vulnerable due to the outbreak of the deadly Coronavirus, the Federal Reserve aims to soothe the economical and trading activities across the globe. The rate cut in interest will grant support to the gold market both locally and internationally. Prices of gold will continue to maintain an optimistic momentum as it reaches new records high for several days. The gold market has gained support from several uncertain factors in politically and globally.
The interest rate cuts will play a big role in the price of gold surging high. The previous year 2019 had uncertainties in the trading market as investors waited for the Federal Reserve final judgments on interest rates and tariff duties of the USA goods in China. The global outbreak of the Coronavirus has led to the US Federal Reserve delivering an emergency half-percentage point on an interest rate cut. The announcement was in a bid to protect and prevent the prolonging effects of the spreading Coronavirus on global expansion.
According to sources of the Federal Reserve, the Coronavirus poses increasing risks to economic activity. Due to these uncertainties in the risks and to support objectives and goals, the FOMC (Federal Open Market Committee) announced yesterday that it is lowering the target range in relation to the federal funds rate by 1/2 percentage point. The central bank has also stated their view on this situation as it will be closely monitoring any developments in the effects of the virus on the market. Also, properly monitoring the implications in the economic outlook and will be devising tools to support the economy.
It was a unanimous vote to declare an emergency cut to the interest rates. As Coronavirus poses a huge threat to the economic activities across the globe, the interest rate cut is to help sustain the risk of the global market coming to a devastating slowdown. China which is considered to be one of the biggest markets in the world has been on shut down due to the spread of the deadly virus. The Coronavirus has led to the death of more than 1000 people in China and also claimed the lives of people outside China. The virus has started spreading outside China and the world is on alert about the outbreak.
World Health Organization (WHO) declared Coronavirus has a threat to the global economy and with no availability of vaccines to cure the virus. The situation had brought a sense of fear to the gold market as investors move to purchase in safe-haven assets. The stock markets are also in the wind on the impact of the virus spread on the market. Investors are not willing to invest in the equity market from fear of the impact of the virus on the market.
The price of gold has increased over the past few months. Gold which is a safe haven asset will be experiencing an increase in demand from investors and also a rise in prices. Gold price is expected to climb higher as the various central banks are announcing new easing measures to improve the market. The lower U.S. interest rates cut are the more pressure would be on the dollar and bond yields which will lead to an increase in the appeal of non-yielding bullion.
According to reports, investors have good reasons to seek gold as their investment portfolio in this uncertain period. Gold has reached new records high in this New Year in comparison to previous years.