- Gold is flashing red, having rallied by $180 in the last three trading days.
- Expectations for US fiscal stimulus and the resulting risk-on seems to be weighing over gold.
- Dips could be short-lived as fiscal stimulus could lift inflation expectations.
- Central banks seem to have run out of ammo.
Gold is feeling the pull of gravity in Wednesday's Asian session, having posted solid gains in the previous three trading days.
The yellow metal is currently trading near $1,615 per Oz, representing a 0.25% drop on the day, having hit a high of $1,643 in early Asia.
Prices closed Tuesday with a 4.38% gain, confirming the metal's first three-day winning run since Feb. 24.
The metal rose from $1,455 to $1,635 in the last three trading days as global recession fears were bolstered by the US Senate's inability to push forward the coronavirus spending bill. Further, the Federal Reserve announced an open-ended quantitative easing program on Monday, lifting the US inflation expectations and strengthening the bid tone around gold.
Central banks from New Zealand to Canada look to have run out of ammo, having cut rates to zero and launched asset purchase programs to counter the coronavirus-led slowdown. If the virus outbreak does not slow down, governments would come under pressure to deliver bigger fiscal stimulus packages, which usually bring inflation and bode well for gold.
Also, the fact that major central banks have exhausted their tools could boost haven demand for the hard currency.
The dip seen at press time could be extended further if expectations for US fiscal stimulus continue to power gains in the US and global equities. The Dow Jones rallied over 1,000 points on Tuesday to register its biggest single-day gain since 1993.
However, the dip will likely be short-lived if the stimulus talks falter or fall short of expectations.
Technical levels
Information on these pages contains forward-looking statements that involve risks and uncertainties. Markets and instruments profiled on this page are for informational purposes only and should not in any way come across as a recommendation to buy or sell in these assets. You should do your own thorough research before making any investment decisions. FXStreet does not in any way guarantee that this information is free from mistakes, errors, or material misstatements. It also does not guarantee that this information is of a timely nature. Investing in Open Markets involves a great deal of risk, including the loss of all or a portion of your investment, as well as emotional distress. All risks, losses and costs associated with investing, including total loss of principal, are your responsibility. The views and opinions expressed in this article are those of the authors and do not necessarily reflect the official policy or position of FXStreet nor its advertisers. The author will not be held responsible for information that is found at the end of links posted on this page.
If not otherwise explicitly mentioned in the body of the article, at the time of writing, the author has no position in any stock mentioned in this article and no business relationship with any company mentioned. The author has not received compensation for writing this article, other than from FXStreet.
FXStreet and the author do not provide personalized recommendations. The author makes no representations as to the accuracy, completeness, or suitability of this information. FXStreet and the author will not be liable for any errors, omissions or any losses, injuries or damages arising from this information and its display or use. Errors and omissions excepted.
The author and FXStreet are not registered investment advisors and nothing in this article is intended to be investment advice.
Recommended content
Editors’ Picks
AUD/USD rises to two-day high ahead of Aussie CPI
The Aussie Dollar recorded back-to-back positive days against the US Dollar and climbed more than 0.59% on Tuesday, as the US April S&P PMIs were weaker than expected. That spurred speculations that the Federal Reserve could put rate cuts back on the table. The AUD/USD trades at 0.6488 as Wednesday’s Asian session begins.
EUR/USD holds above 1.0700 on weaker US Dollar, upbeat Eurozone PMI
EUR/USD holds above the 1.0700 psychological barrier during the early Asian session on Wednesday. The weaker-than-expected US PMI data for April drags the Greenback lower and creates a tailwind for the pair.
Gold price cautious despite weaker US Dollar and falling US yields
Gold retreats modestly after failing to sustain gains despite fall in US Treasury yields, weaker US Dollar. XAU/USD struggles to capitalize following release of weaker-than-expected S&P Global PMIs, fueling speculation about potential Fed rate cuts.
Ethereum ETF issuers not giving up fight, expert says as Grayscale files S3 prospectus
Ethereum exchange-traded funds theme gained steam after the landmark approval of multiple BTC ETFs in January. However, the campaign for approval of this investment alternative continues, with evidence of ongoing back and forth between prospective issuers and the US SEC.
Australia CPI Preview: Inflation set to remain above target as hopes of early interest-rate cuts fade
An Australian inflation update takes the spotlight this week ahead of critical United States macroeconomic data. The Australian Bureau of Statistics will release two different inflation gauges on Wednesday.