Gold Swings After ECB Announces More Stimulus as Virus Spreads

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Gold got a brief lift after the European Central Bank launched an extra emergency bond-buying program worth 750 billion euros ($820 billion) to cushion the economy from the coronavirus pandemic as the continent surpasses China in its number of confirmed cases and deaths.

Bullion jumped from the lowest close since December after the ECB moved to calm markets, adding to efforts across the world that have so far largely underwhelmed investors. The decision, which followed an unscheduled meeting, is the latest in an escalating response to an outbreak widely seen driving the global economy into recession this year. Most of gold’s gains soon faded.

Markets have been whipsawed in recent weeks, and gold hasn’t been spared, as investors sold the metal to cover losses elsewhere and the dollar surged. The CBOE Gold ETF Volatility Index, a measure of expectations for price swings, is at the highest since 2008. The Federal Reserve’s recent emergency interest-rate cut to nearly zero and other measures have so far failed to stem market stress as the crisis shows little sign of peaking any time soon.

“While stimulus measures/rate cuts — including the ECB emergency bond-buying program — are usually positive for gold, we think any support will be short-lived,” Vivek Dhar, an analyst at Commonwealth Bank of Australia, said in an email. “There is a clear preference for the U.S. dollar over gold as global market risks intensify, and that should pressure gold prices lower in the near term.”

Gold initially rose as much as 1% to $1,501.13 an ounce, but then dropped back to trade flat at $1,487.49 at 9:26 a.m. in Singapore. So far this year, bullion’s about 2% lower, while global stocks have plunged almost 30% and crude oil has collapsed by 60%.

Among the other main precious metals, silver climbed 1.8%, platinum added 1.2%, and palladium rose 0.8%.

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