- Gold reached its highest level since November 2012.
- Powell of the Fed again rules out negative rates but says more stimulus may be needed.
- The renewed tensions between the United States and China could lead to an auction for the yellow metal.
Gold jumped to a new 7.5-year high on Monday, although Federal Reserve Chairman Jerome Powell ruled out negative rates and equity futures have gained ground.
Yellow metal reached $ 1,760 an ounce during trading hours in Asia to reach the highest level since November 2012, having posted gains in each of the previous four trading days.
Powell excludes negative rates
The central bank remains opposed to the use of negative interest rates to respond to the economic impact of the coronavirus pandemic, Federal Reserve President Jerome Powell told CBS in a 60-minute interview held this weekend.
Despite this, gold, a zero-yielding refuge metal, peaked over several months, possibly due to renewed friction between the United States and China over the coronavirus epidemic. The Trump administration has stepped up its anti-China rhetoric this weekend, a senior official suggesting that Beijing has sent airline passengers to spread the infection around the world.
In addition, Powell told CBS that the central bank and Congress should do more to help the economy absorb the shock of the virus epidemic.
Markets started fixing negative rates earlier this month, with President Trump calling them a “gift” appreciated by other countries. Powell, however, dashed hopes for negative rates on Wednesday. Bank of England Governor Andrew Bailey and Bank of Japan governor Haruhiko Kuroda suggested Thursday that they focus on buying bonds and other lending programs to keep costs down. ‘borrowing at a low level.
However, looking at the gold rally, it looks like investors are confident that the Fed and other major central banks will eventually cut rates into negative territory. The Reserve Bank of New Zealand opened the door to rates below zero last week. The European Central Bank, the Swiss National Bank and the Bank of Japan are already pursuing a negative interest rate policy.
At the time of publication, gold was trading at $ 1,756 per ounce, representing a gain of 0.90% on the day. Meanwhile, the dollar index, which tracks the value of the greenback (the biggest enemy of gold) against major currencies, is sidelined near 100.34.