Gold prices rise above Rs 46,000 as US Fed warns of recession; WGC predicts a slow recovery

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Gold prices climbed up after US Federal Reserve Chair Jerome Powell warned of a prolonged recession for the US economy due to COVID-19, which supported yellow metal prices.

Powell also hinted that the US central bank will have a negative interest-rate policy which is off-base, but vowed to prop up the virus-hit economy. On MCX in India , gold June futures gained Rs 186 or 0.40 per cent at Rs 46,167. While silver July futures were ruling at Rs 43,121 per kg, up Rs 156 or 0.36 per cent.

Traders expect gold may trade positive towards Rs 46500 to 46700 levels. Globally, spot gold climbed 0.1% to $1,716.66 per ounce US gold futures rose 0.6% to $1,726.20. Palladium rose 0.8% to $1,832.72 an ounce. Among other precious metals, platinum gained 0.2% to $758.35, while silver fell 0.6% to $15.55.

On the domestic equity front, Sensex was trading at 31,390.29, down 618.32 points or 1.93 per cent. While the broader Nifty 50 index was ruling 170 points or 1.82 per cent down at 9,213.15.

A research survey by the World Gold Council (WGC) claims the COVID-19 pandemic and ensuing economic lockdowns have slashed global growth forecasts for 2020. Our analysis shows that higher risk and uncertainty combined with lower opportunity cost will likely be supportive of gold investment demand in 2020. “This could offset the negative effect of lower consumer demand on gold performance as economic activity contracts. Gold’s behaviour thereafter may depend on the speed of the recovery and the duration of monetary policy and fiscal stimuli,” the report said. The impact of COVID-19 on the global economy is deeper and longer than initially expected. Economic activity remains suppressed amid concerns of multiple waves of contagion and global economic output does not return to pre-pandemic levels until 2023 – led by emerging markets. The recovery is much slower for advanced economies, which do not get above their 2019 real GDP level until 2026. Central banks keep interest rates low – and in many countries, negative – for much longer and credit spreads remain elevated through to 2024, it added.

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