It’s a good time to be a gold investor after a tandem of the coronavirus outbreak and now a surprise rate cut by the Federal Reserve of 50 basis points on Tuesday is fueling gold prices.
Per a MarketWatch report, “bulls say that gold has enjoyed a bounce so far this week because it was oversold last week, as the market reaction to news of the spread of the infectious disease that originated in China in December produced frenetic swings in asset prices and an unusual spate of selling in precious metals as investors sought to raise cash.”
“The safe-haven metals are also getting a bid after the Group of Seven finance ministers released a statement…that offered no specifics on dealing with the coronavirus outbreak,” wrote Jim Wyckoff, senior analyst at Kitco.com, in a Tuesday research report.
Other market experts, however, are leery of Monday’s surge. As some analysts expected in Tuesday’s trading session, a rate cut alone won’t revitalize the markets after the strong start to 2020 before the coronavirus outbreak upended the capital markets.
Wall Street was widely expecting the central bank to implement a rate cut after rates remain unchanged in its last policy meeting earlier this year. In 2019, the Fed instituted three consecutive rate cuts following four rate hikes the previous year.
Gold prices were closing in on $1,700 per ounce but subsequently fell–more strength could be on the way however if coronavirus fears persist.
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).
As for other precious metals, palladium faltered in last Friday’s trading session as it “fell 1.7% to $2,548.32 an ounce, having plunged as much as 13% on Friday, the most since the 2008 financial crisis” according to a CNBC report. “Platinum dipped 0.9% to $855.84, while silver rose 0.5% to $16.75 after both fell to their lowest levels in about six months in the previous session.”
Investors sensing a buy-the-dip move can look at the Aberdeen Standard Phys PalladiumShrs ETF (NYSEArca: PALL). The fund is designed for investors who want a cost-effective and convenient way to invest in palladium with minimal credit risk.
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