With the way the stock market has been fluctuating up and down as of late, investors who can’t stand the high level of volatility are probably parking their capital in the cash lot. With the Federal Reserve slashing interest rates to zero percent, cash might be king, but gold is certainly vying for that crown as a more suitable safe-haven asset.
The effects of the coronavirus are no doubt weighing on the minds of investors. Likewise, the central bank responded in tow by bringing rates down to zilch and dumping an epic $700 billion worth into quantitative its easing program.
“The effects of the coronavirus will weigh on economic activity in the near term and pose risks to the economic outlook. In light of these developments, the Committee decided to lower the target range,” the Fed said in a statement. “The Committee expects to maintain this target range until it is confident that the economy has weathered recent events and is on track to achieve its maximum employment and price stability goals.”
Economists are already expecting a cargo of negative data ready to be shipped to the markets.
The Fed must have been on the phone all weekend with its business contacts and got all the info it needed. To move like this three days before the meeting tells me to expect an avalanche of horrible data in the next few weeks.
— David Rosenberg (@EconguyRosie) March 15, 2020
With zero rates putting downward pressure on the dollar, gold could be left standing once the smoke is all clear.
“I think the only thing you can own right now is gold,” said Adam Button, managing director at Forexlive.com.
“The deficits are doing to be outrageous,” he added. “During the financial crisis, the government had to bail out the banks, but now because of the impact of the virus, they are going to have to bail out everyone.”
Gold Price in US Dollars data by YCharts
Investors looking to get gold exposure can look at funds like SPDR Gold Shares (NYSEArca: GLD) and the SPDR Gold MiniShares (NYSEArca: GLDM). Precious metals like gold offer investors an alternative to diversify their holdings, and like other commodities, gold will march to the beat of its own drum compared to the broader market.
Traders looking for leverage can use funds like the Direxion Daily Gold Miners Bull 3X ETF (NYSEArca: NUGT), VanEck Vectors Gold Miners (NYSEArca: GDX) and the Direxion Daily Jr Gold Miners Bull 3X ETF (NYSEArca: JNUG).
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