As the coronavirus persists, the stock market continues to plummet. Gold experienced a plummet last week, but it has continued to enjoy a rise after the Federal Reserve emergency cuts announced on 3/3/20 to combat the economic threat of the coronavirus.
What happened with gold last week?
Steep stock-market declines make gold and silver the choice safe-haven asset for investors who want to generate cash. As people began selling their stocks for precious metals, gold and silver still had a sharp downward trend in price. While gold experienced a high last week, by Friday its price also plummeted. Why is that?
There are two factors to consider. First, when there is high demand, there can sometimes be an issue of overselling. This caused the price of gold to drop 4.6% for the session. The weekly loss was 5%, which hasn’t occurred since November 2016. For this year, prices fell 1.3% since January. The second contributing factor to the price drop is the drop in demand from countries. China and India are big investors of precious metals, and these countries make up 1000 metric tons of the annual demand for gold. Because of the coronavirus, there were fewer face-to-face purchases by these countries, thus dampening demand.
What’s going on with gold now?
Despite this, on 3/3/20, the spot price of gold suddenly sprung back to life as though there was no slump from last week at all. Gold faced this fluctuation in response to investors wanting to conserve their money before the Federal Reserve’s .5% emergency rate cut hit. This is an effort by the government to stimulate stock market growth in response to the economic threat of the coronavirus. The Federal Reserve declared this rate cut in an effort to prevent a new global recession. Investors responded by selling their stock and putting their money into safe-haven assets, such as gold and silver.
So, gold may have dropped last week, but prices recovered on Monday and Tuesday. Lower interest rates of gold reduced the opportunity cost of holding nonyielding bullion in the wake of the economic threat of the coronavirus. George Gero, managing director at RBC Wealth Management stated that gold’s upward trend was aided by the Federal rate cut and global economic pullback. This is because gold attracts buyers when there are low-interest rates.
To sum up…
In short, the gold price slumped last week and bounced back on Monday and Tuesday as investors reacted to the spread of the coronavirus. Investors sought to raise cash via buying and selling precious metals. People rely on gold for collateral after suffering losses in the equities market.
Gold has climbed year to date. Friday’s plummet did little to affect this. The Federal Reserve’s emergency cut was an attempt to calm the market turmoil. This market turmoil has extended to gold too, but that just means that gold is all the more important right now.
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With the current market fluctuations, now could be a good time to sell your gold bullion. If you’re looking for a reputable dealer with top ratings and a great reputation in the industry, check us out! We buy a variety of precious metals, in addition to diamonds and scrap metal. Our team is ready to assist you with selling your precious metals to Bullion Exchanges, your precious metals dealer in midtown Manhattan.
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