Gold handed a win with Powell’s cut hammering Treasury yields

The yellow metal is up more than 8% this year.
Gold edging higher after 10-year Treasury yield plunges below 1%. Image: Shutterstock

Gold just got a powerful boost from the Federal Reserve, with bullion extending gains in Asia after the US central bank’s emergency, virus-driven rate cut set off a collapse in 10-year Treasury yields to an all-time low.

Bullion prospers from low rates, and more easing is expected from the Fed and other central banks as policy makers seek to blunt the economic fallout from the health crisis. Money markets point to the Bank of Canada jumping into action next with a cut expected its scheduled meeting later Wednesday.

Gold has surged more than 8% so far this year on sustained haven demand, with prices hitting a seven-year high as holdings in bullion-backed exchange-traded funds expanded to a record. Fed policy makers shaved 50 basis points off their benchmark, cutting rates outside the normal cycle of meetings for the first time since 2008. The Fed’s easing, including debt purchases, contributed to a decade-long rally in bullion that sent prices to a record in 2011.

“Central-bank actions are aiding gold appreciation,” said Chris Weston, head of research at Pepperstone Group in Melbourne, Australia. “The Fed are worried, and so the equity market feeds off Powell’s sentiment, which is supporting gold,” he said, referring to Fed Chairman Jerome Powell.

Gold jumped as much as 0.7% to $1 652.67 an ounce, and traded at $ 1 643.67 at 11:09 a.m. in Singapore following Tuesday’s 3.2% surge. The Fed’s latest move is helping to reinvigorate demand after bullion plunged on Friday, with investors selling the metal to cover losses in other asset classes.

The S&P 500 Index ended almost 3% lower on Tuesday following the Fed’s cut, as well as comments from Powell that the outbreak will weigh on activity “for some time,” and a joint call between leading finance ministers. The 10-year Treasury yield plunged below 1% to a record low, while the dollar fell.

Gold-backed ETFs saw more inflows on Tuesday, with the total expanding to the most ever. There was an influx 15.6 tons, the most in tonnage terms since mid-January, according to a preliminary tally compiled by Bloomberg News.

On the virus front, Vice President Mike Pence — who’s leading the US response — said that 13 states now have coronavirus cases. Infections also rose in South Korea and Iran, where more officials were diagnosed.

© 2020 Bloomberg L.P.

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‘’Politicians, markets and the Coronavirus don’t mix’’, and [‘’at the end fiat money returns to its inner value- zero’’] – Voltaire
It’s only a matter of time before the ‘’stork money – the trillions of US Dollars will start flowing back to the ‘’emerging markets’’ – especially the commodity currencies like the Aussie and the Rand.

The ‘’us’’ and ‘’them’’ syndrome – but the reality is that ‘’Yield is King’’
German 10 Bund yield drop more than 10 percent during the last 15 years (The yield on the 10-year German bund settled at negative 0.201% and the yield on the US Treasury Bills are around 1.1 %)

Emerging markets (like SA) are currently been hit hard by unscrupulous traders and funds but the ultimate casualties will be the ordinary shareholders in various funds all over the world, that won’t earn a decent return on their pensionable investments!
But remember, the chips are down now and panic is busy settling in after many years of government greed where there is no turning back, not in the moral sense. No one really knows but the voters can be rehabilitated but save to say that their moral conscience can never be restored.
I don’t trust the ANC and after years of their rule, I am convinced that they are planning g to ‘’ devalue the Rand’’ in order to betray all creditors – a system /procedure that is called inflation.

So what how many citizens hold gold and how many live from the interest they get on their savings or try and boost their investment in a savings account through the interest they expect on their savings.

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