Gold Prices Jump After US Fed's Emergency Rate Cut

On Monday, amid negative sentiments in the stock markets and dollar's slump after the US Federal Reserve's surprise emergency rate cut, investors sought refuge in gold. In the international markets, spot gold rose almost 3 percent on to over $1,550 an ounce.

On MCX, gold futures (April 2020) were trading nearly 2 percent higher, above Rs 41,000 per 10 grams, after touching an intraday high of Rs 41,199/10 grams.

Gold prices in India often reflect the international trend as most of the country's demand for the precious metal is met by imports.

Emergency rate cuts in the US and New Zealand failed to ease the fears of an economic shock amid coronavirus spread. The US Fed slashed its rates to essentially zero, to ensure liquidity in dollar lending.

The new fed funds rate, which is used as a benchmark both for short-term lending for financial institutions and as a peg to many consumer rates, will now be targeted at 0 to 0.25 percent, down from the range of 1 percent to 1.25 percent.

In New Zealand, its central bank slashed interest rates by 75 basis points to a record low.

Low-interest rates reduce the opportunity cost of holding non-yielding bullion.

However, holdings in gold are also falling as investors incline towards holding cash in times of economic uncertainties and partly due to profit bookings. The SPDR Gold Trust, world's largest gold-backed ETF (exchange-traded fund), said its holdings fell 1.33 percent to 931.59 tonnes on Friday.