Gold has added more lustre to its appeal this week with safe haven demand growing notably in the last few days. The precious metal has seen its value soar as Wall Street felt anxiety and uncertainty increase amid talk of an expected second wave of COVID-19 later in the year and a stark warning from the Federal Reserve at the conclusion of its monthly policy meeting on Wednesday.
The Federal Reserve chair, Jerome Powell said that more economic stimulus packages would be created as needed to support the recovery, warning that there were no quick fixes and the road ahead would be long and difficult. He told reporters, “We’re not even thinking about thinking about raising rates. We are strongly committed to using our tools to do whatever we can for as long as it takes.
“My assumption is that there will be a significant chunk, well, well into the millions of people who don’t get to go back to their old jobs and there may not be a job in that industry for them for some time. It could be some years before we get back to those people finding jobs.”
Bloomberg characterised the outcome of the policy meeting as ‘dovish’ with its analysts concluding, “The Federal Reserve remained resolute in its dovish assessment of the medium-term economic outlook, estimating it would take nearly three years for the economy to return to pre-virus levels of activity, based on the median forecast.”
While Wall Street has been optimistic of late (the S&P Index alone has gained 44.5% in the last three months), these comments threw cold water on the resurgence, leaving it to slump to a low not seen since 16 March. Markets in the UK and Asia also fell, along with energy and crude oil prices.
With a dose of reality bringing markets down, gold has received a big boost on safe haven demand trading $17.00 higher yesterday (Thursday) to $1,737.80.