The announcement from the US Federal Reserve yesterday of unlimited quantitative easing created a record day for the price of gold.
Long seen as a hedge against irresponsible economic policy, gold railed 6.8% to a price of $1,567. The increase in gold price of $83 was the largest since records began in 1984.
The price of gold has not seen highs of $1,700 since 2012 but there appears to be strong chance it could reach that level in the coming months, if not weeks.
QE Infinity not going down so well? pic.twitter.com/mts9NMYPEq
— Stacy Herbert (@stacyherbert) March 24, 2020
Alternatively, stocks did not react well to the Federal Reserve’s announcement. Rather than rebounding they had another poor day, with the Dow Jones slumping 3%. There are other factors to this slump, however.
US Congress is currently at loggerheads regarding the $2 trillion coronavirus aid package. Republicans in the house have accused the Democrats of inserting unnecessary amendments to the bill, whilst the Democrats have argued the bill doesn’t go far enough. There are hopes that negotiations that lasted through the night might allow the bill to be approved today.
The FTSE in the UK and the US futures market are both predicting a better day in the more traditional markets. Yet as we have seen in the past few weeks, these gains have often been wiped out the following day.
Other factors could boost gold
There are other factors that could boost the price of gold in these uncertain times other than the failing stock market and Federal Reserve action.
With global supply chains currently grappling with closed borders and a crippled workforce it may occur that the supply of gold will be hit harshly. This would suggest a further increase in demand due to the scarceness of the precious metal.
Bitcoin meanwhile has again been performing strongly creeping up and currently around $6,700. Considering the large drop in the previous week the upside for Bitcoin also looks positive.