Gold Bullish for Second Consecutive Day as Markets Anticipate Central Banks’ Reaction to Coronavirus

Gold prices continue to climb higher for the second consecutive session early on Tuesday over rising hopes for interest rate cuts by leading central banks, especially the Fed, in response to the coronavirus outbreak and its potential economic impact. At the time of writing, GOLD is trading at a little above $1,598.

While a rate cut of 0.25% by the Fed is almost completely priced in, markets are now expecting that the US central bank could announce an even more aggressive rate cut by as much as 0.50% as soon as this month in order to protect the US economy from possible economic damage in the wake of the spreading coronavirus infection around the world. A more dovish Fed drives weakness into US dollar and increases the opportunity cost of holding gold, helping the yellow metal’s prices climb higher lately.

Recent economic data releases also point towards increasing signs of weakness in global economic growth, driving the risk-off sentiment in financial markets and increasing the safe haven appeal of gold. Manufacturing activity has witnessed a slowdown and even contraction in leading economies around the world, including the US and China, increasing the likelihood of recession in the global economy.