(Kitco News) -A cacophony of instability has hit financial markets at the start of a new trading week, but with central banks, led by the Federal Reserve, dropping interest rates to zero, analysts now say that the only place investors can turn to is gold.
At the beginning of the Asian trading session, the gold market started Sunday evening strong but volatile; April gold futures last traded at $1,559.50 an ounce, up 2.8% on the day.
Meanwhile, the S&P 500 Index opened the Asian session down 4.77% to their daily trading limit outside the United States.
The moves come after the Federal Reserve surprised markets with a second emergency rate cut in as many weeks. Sunday afternoon, the U.S. Central bank said that it was bringing interest rates to within a target range of 0% to 0.25%.
“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.”
Some market analysts have described the latest emergency Fed decision as another panic move. Still, expectations of a global recession continue to rise as the coronavirus continues to spread worldwide, prompting nations to effectively shut down.
Economists are now wondering with the Fed’s move, just how bad the global economy will weaken.
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.
Source: Neils Christensen | Kitco News
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