Gold traded sharply lower since March 9th as the crisis of the coronavirus intensified, but is regaining its shine on Monday. Normally a safe haven asset that benefits from periods of instability, gold has fallen as investors hoarded cash and liquidated positions to meet margin calls as equity markets crumbled. Looking back to the financial crisis of 2008, gold prices also fell initially before entering a multi-year uptrend.
US stock index futures opened limit down on Sunday night before reversing on stimulus hopes. The market had been rattled by a statement from Federal Reserve Bank of St. Louis President James Bullard, which suggested that the U.S. unemployment rate could rise to 30% in the second quarter due to shutdowns. A 30% unemployment rate is higher than that of the Great Depression, which peaked at 24.9% in 1933. On Sunday, Bullard stated that ‘everything is on the table’ in terms of the Fed providing support. The selloff in stock index futures reversed on Monday, after the Federal Reserve pledged asset purchases with no limit to support markets.
At the time of this writing the coronavirus global death toll has risen to 14,790 with 343,421 total confirmed cases, according to data from Johns Hopkins University. On Sunday, lawmakers in Washington debated over a $1.8 trillion relief package that would include direct financial help for Americans. Nearly one in three Americans have been ordered to stay home to prevent the coronavirus from spreading further.
On Monday gold whipsawed lower before reaching higher, now trading above the ‘line in the sand’ 200-period moving average on the daily chart. Horizontal support lies beneath at 1,444. A close above the 200-period moving average would reenergize gold bulls, who saw 7 year highs take place just two weeks ago.