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Gold to Boom after Fed’s Coronavirus Rate Cut

It is not new that the latest novel coronavirus does not only affect the people but the economy as well. More and more people are getting scared of the stability of the government and how they can fully assist their countrymen with the pandemic that is currently experienced in the world. Would the virus lead to a global economic downturn? And will we be able to recover from this pandemic, medically and economically? These are just a few of the questions that cross our minds.

While the healthcare sector is carrying the weight of this new strain of coronavirus, business enterprises, on the other hand, are also dealing with lost revenue and disrupted the supply of chains as some factories are forced to shut down to contain the virus. Travel restrictions, especially on the areas greatly affected by the pandemic, hinders a lot of business activities. However, despite all the negative effects, the new coronavirus brought us, the rate of gold unexpectedly surged high by about 3% ($1,643.76 per ounce) early in March after the US Federal Reserve announced an emergency rate cut. The surprise announcement, or “drastic action” as some would say, from the US Fed was in line with several risks that the economy is currently facing due to COVID-19. 

According to exchange-trade experts, interest rate cuts had been practiced before towards gold and each time, gold’s value rose each time. In fact, in 1971, gold had gained by up to 53% over the 2-year emergency cut. In the past, gold had been oversold and is still enjoying a bounce due to the panic caused by COVID-19. People are resorting to selling their precious metals like gold in order to have cash at hand just in case worse comes to worst. 

Experts assume that the central banks from the world’s largest economies will also reconsider their monetary policies; at least while the world is still dealing with the effects of COVID-19. And when this happens, the price of gold will likely continue to increase and it may even top its 2011 record of $1911.60 per ounce. Moreover, Hong Kong also lowered its base rate charged by 50 basis points through the overnight discount window. Aside from gold, other precious metals that have risen are platinum with 0.9% at 882.50 and silver with 0.2% to $17.21 per ounce.

You might be wondering why one should invest in gold amidst an economic crisis. Well, gold is viewed as a refuge and as valuable as government bonds and currencies. According to experts and analysts, gold will provide you with a shield or protection during the trying times when the inflation rate is higher and the economic status is uncertain. With COVID-19 threatening the global economy, it is an automatic reflex to many investors to seek refuge invaluable items like gold. With this, it is safe to say that an uncertain economy and low-interest rates are the perfect ingredients to strengthen gold investment demand. 


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