Gold prices are nudging higher as investors react to a slight drop in U.S. Treasury yields and lower equity futures. Gold is recovering from a steep break on Tuesday, as doubts about a stimulus package by U.S. President Donald Trump to soften the economic impact of the coronavirus epidemic weighed on risk sentiment.
At 12:25 GMT, April Comex gold is trading $1667.60, up $7.30 or +0.44%.
Investors Raising Doubts over US Fiscal Stimulus Response
Gold is being underpinned by a CNBC report that said the White House is far from ready to roll out specific proposals to address the rapidly escalating coronavirus outbreak, administration officials said.
The revelation came as gold prices pointed lower following President Trump’s suggestion that a payroll tax cut and other stimulus measures may be in the works.
However, inside the administration, some officials were stunned by Trump’s claim that he would hold a press conference Tuesday to announce an economic plan as the actual details remain up in the air. “That was news to everyone on the inside,” one official said.
The actual details of any plan remain up in the air. “It’s not there right now,” and official said. “A lot of details need to be worked out.”
Reuters said that the White House and Congress negotiated measures on Tuesday to bolster the U.S. economy and Americans’ paychecks against the epidemic’s impact, although there was no immediate sign of a deal.
The major U.S. stock indexes are expected to open sharply lower, a move that could underpin gold prices. However, gold buyers are being a little tentative about chasing prices higher due to fears over margin call selling. Two weeks ago, gold fell $82 as investors sold the investment to meet margin calls in the stock market.
On the bullish side, however, falling Treasury yields will weaken the U.S. Dollar, and this should drive up demand for dollar-denominated gold. Additionally, gold may have gotten a little boost earlier today when the Bank of England cut its benchmark rate by 50 basis points to 0.25%.
The biggest influence on gold today should be Treasury yields. Basically, lower yields, higher gold.
The story driving the price action will center on U.S. government stimulus. Gold could fall initially if the Trump administration announces stimulus measures.
It could rebound, however, if traders feel the stimulus falls well short of expectations.