Gold Soars by Over 1% as Markets Expect Fed Rate Cut
Arslan Butt • 1 min read
Gold prices are off to a bullish start at the beginning of a new trading week, gaining more than 1% on rising expectations for a Fed rate cut even as China’s manufacturing sector experiences the fastest ever recorded contraction during February. At the time of writing, GOLD is trading at a little above $1,604.
A broad market sell-off had caused gold to lose around 4.5% of its value on Friday as investors liquidated their positions. However, the precious metal remains in favor as a safe haven asset amid continued increase in coronavirus cases being reported around the world.
The Fed is widely expected to cut interest rates, with a 0.25% rate cut almost completely priced in for this month. Lower interest rates weakens the US dollar and increases the opportunity cost of holding bullion, supporting the yellow metal prices currently.
To make matters worse, the market sentiment deteriorated significantly following the release of China’s manufacturing PMI which revealed the fastest ever pace of contraction in the sector ever recorded. The contraction beat economists’ forecasts and escalatdd tensions about the possibility of the coronavirus causing an economic slowdown in China as well as in the rest of the world, helping raise the demand for gold in markets.