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FED to Buy another $500 Billion - Gold Price Soars up $50
0Updates on the Coronavirus Gold Price
The coronavirus gold price is up around $50 as the Federal Reserve responds to the coronavirus-afflicted economy. On Monday, the Fed began taking aggressive measures. Among these measures, the Fed upped the amount of liquidity it's offering in the short term to keep credit flowing in an economy where consumers are not currently consuming many services.
What measures are the government taking for the economy?
Midday on Monday, the Fed announced a $500 billion dollar repo operation, which involves banks putting up high-quality collateral, including Treasurys, for liquidity to keep functioning. Other aggressive measures by the FED include reinstating the Commercial Paper Funding Facility first used during the 2008 crisis.
To do this, the Fed needed the approval of the Treasury Department as part of the Fed’s 13(3) emergency lending powers. The Tuesday announcement stated the facility would reopen to respond to the coronavirus strain on the economy.
The government used this commercial paper funding facility to support highly rated big businesses. This commercial paper market is the place for creditworthy companies to pledge future accounts payables or inventories for cash. This accrues short-term debt to meet financial needs such as payroll and inventory expenses to be paid off later. There are growing fears, however, that the companies with halted business will not be able to repay these debts. However, the Fed will utilize its emergency powers to give this short-term cash directly to small businesses to support the US workforce.
What does this mean for the coronavirus gold price?
The gold price affected by the coronavirus begins to recover today despite economic turmoil:
April gold futures are slowly improving already. So, gold has struggled but analysts suggest that gold will be an asset to help investors as deficits and balance sheets grow to overwhelming lengths.
Furthermore, stocks began to recover slightly on Tuesday morning after having its third worst day ever. This is after the anticipation of the Presidential Administration’s proposal of a stimulus package around $850 billion for the economy.
So, while recession after the government imposed travel bans and business halts, the gold price—as well as silver, platinum, and palladium—begins to improve.
How to invest in gold
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Disclaimer: This article is not meant to serve as professional economic advice. Any action you take upon the information from this article and website is strictly at your own risk.
