Gold Talking Points
The price of gold[1] trades at its highest level since 2013 following the outbreak of COVID-19[2], and the weakening outlook for the world economy may keep the precious metal afloat as it fuels bets for monetary support.
Fundamental Forecast for Gold: Bullish
The price of gold holds near the yearly high ($1689) as the coronavirus shows no signs of slowing down, and the precious metal may continue to benefit from the current environment as the shock to the global supply chain spurs speculation for lower interest rates.
In fact, Fed Fund futures now reflect a greater than 90% probability for a 25bp rate cut on March 18 even though the US Non-Farm Payrolls (NFP[3]) report is anticipated to show the economy adding 195K jobs in February. The threat posed by COVID-19 may force the Federal Open Market Committee[4] (FOMC) to alter the course for monetary policy as former Chair Janet Yellen warns that the outbreak “could throw the US into recession.”
However, recent remarks from Fed Vice Chair Richard Clarida[5]suggest the central bank is in no rush to respond to the coronavirus as the permanent voting-member on the FOMC insists that “the current stance of monetary policy likely will remain appropriate” following the rate easing cycle in 2019.
In turn, Chairman Jerome Powell and Co. may opt to alter the forward guidance when the central bank updates the Summary of Economic Projections (SEP), and Fed officials may utilize the interest rate dot-plot to prepare US households and businesses for a more accommodative stance by forecasting a lower trajectory for the benchmark interest rate.
With that said, speculation for lower interest rates may keep the price of gold afloat as market
