A Fortune 500 financial services organisation has said this week that the response of central banks around the world to the coronavirus outbreak will be key for gold prices. Rhona O’Connell, the head of market analysis for the EMEA and Asia region at INTL FCStone said that central bank activity could be very supportive for gold and something that investors should keep a close watch on.
She said, “The potential industrial fallout from coronavirus is already leading a number of governments to cut interest rates or add to easing activity, while the U.S. 10-year bond has been dipping in and out of negative territory. This is all positive for gold in a risk-averse environment… The financial markets have been a hive of activity since China’s return and after a rout on Monday. There was an almost palpable wave of relief on Tuesday when the People’s Bank of China (PBoC) continued injecting liquidity on a grand scale. This propelled Chinese equities higher and equities around the world were happy to take their cue accordingly.
“Asian governments are already starting to look at interest-rate decisions. Thailand has already cut rates … to a record low of 1.0% for its benchmark rate, arguing that a large number of businesses would be affected by the coronavirus as well as drought and a delay in passing the budget.”
It is though that Bahrain, Australia and Iceland may also follow with budget rate cuts. Japan and the EU are in negative space already.
O’Connell says that the movement by central banks is positive for gold – meaning you could buy now with confidence as the situation unfolds.