Gold trades in red after three-day winning streak
- Gold is flashing red, having rallied by $180 in the last three trading days.
- Expectations for US fiscal stimulus and the resulting risk-on seems to be weighing over gold.
- Dips could be short-lived as fiscal stimulus could lift inflation expectations.
- Central banks seem to have run out of ammo.
Gold is feeling the pull of gravity in Wednesday's Asian session, having posted solid gains in the previous three trading days.
The yellow metal is currently trading near $1,615 per Oz, representing a 0.25% drop on the day, having hit a high of $1,643 in early Asia.
Prices closed Tuesday with a 4.38% gain, confirming the metal's first three-day winning run since Feb. 24.
The metal rose from $1,455 to $1,635 in the last three trading days as global recession fears were bolstered by the US Senate's inability to push forward the coronavirus spending bill. Further, the Federal Reserve announced an open-ended quantitative easing program on Monday, lifting the US inflation expectations and strengthening the bid tone around gold.
Central banks from New Zealand to Canada look to have run out of ammo, having cut rates to zero and launched asset purchase programs to counter the coronavirus-led slowdown. If the virus outbreak does not slow down, governments would come under pressure to deliver bigger fiscal stimulus packages, which usually bring inflation and bode well for gold.
Also, the fact that major central banks have exhausted their tools could boost haven demand for the hard currency.
The dip seen at press time could be extended further if expectations for US fiscal stimulus continue to power gains in the US and global equities. The Dow Jones rallied over 1,000 points on Tuesday to register its biggest single-day gain since 1993.
However, the dip will likely be short-lived if the stimulus talks falter or fall short of expectations.