Earlier today, gold rose during the Asian session following news on the United States Federal Reserve boosting its program of buying corporate debt. Given fears of a second wave of the pandemic, the aim of the US strategy is to curtail the financial crisis owing to the COVID-19 pandemic.
The strategy aims at combating the financial crisis of the COVID-19 pandemic as fears increase about a second wave of the infections. Gold gained 0.15% to $1,727.05 per ounce at 2.10pm local time after previously losing over 1% in the previous trading session. U.S. gold futures gained 0.6% to reach $1,737.80.
The commodity typically gains when there are increased stimulus measures from major central banks around the world and one reason for this is the perception of the asset as a good hedge against currency debasement as well as inflation.
According to ANZ analyst, Daniel Hynes, “The Fed pushing ahead with further stimulus measures, including these corporate bonds, indicates that this type of monetary easing is going to continue for some time. There are enough concerns around the economic outlook to keep investor demand for gold pretty solid.”
As at yesterday, the total number of COVID-19 cases across the world surpassed 8 million. More so, the United States and China are dealing with new outbreaks.
To this end, John Sharma, National Australia Bank economist, explained that the “Increasing infections imply economic weakness, need for continued further economic (fiscal and monetary support), which are all supportive of gold.”