Despite continued optimism about the containment of the coronavirus and a decreasing number of new daily diagnoses, gold prices rallied further on Wednesday and hovered near 7-year highs. Gold futures were up 0.012 percent as of 2:09 p.m. HK/SIN, to $1,612 per ounce. If prices close above $1,606.20 per ounce, they will close above highs not hit since March 2013.
Gold usually acts as a safe haven asset, favored by traders during times of market turmoil. It is therefore interesting that prices have continued to rise as contagion fears have declined. Analysts have suggested that the surge in gold prices is, perhaps, related to strategic portfolio hedging rather than fears about the virus. The yen, often considered the most popular safe haven currency, has fallen in recent sessions, as traders have shown favoritism towards the dollar despite the recent threats to the global economy due to supply disruptions in Asia. The dollar gained 0.04 percent against the yen on Wednesday afternoon in Asia, trading at 111.40. The British pound also fell against the dollar, down 0.07 percent to $1.291, while the Euro was down 0.083 percent to $1.08.
On Thursday, the People’s Bank of China cut its benchmark one-year loan prime rate by 10 basis points and the five-year loan prime rate by 5 basis points. The announcement came shortly after the bank cut the one-year medium-term lending rates as part of its stimulus measures to bolster the economy as closures of factories, businesses, and transportation lines slashed revenues and caused forecasts for Q1 to be downgraded.
Macao’s casinos started to reopen on Thursday, with most running at 50 percent capacity to keep visitors a safe distance away from each other and to prevent the spread of germs. Factories and businesses in China have also begun to reopen this week. Only 394 new cases of the virus were reported on Wednesday, with traders taking this decreased number as a sign that the spread may soon be ended completely. Health officials remain cautiously optimistic but have commented that it’s too early to tell if the virus has officially peaked.