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Gold Eases off After Surging to Highest Since 2012

By Geoffrey Smith 

Investing.com -- Gold prices paused for breath on Tuesday after a rally on expectations of a sharp recession in the U.S. and elsewhere that took them to an eight-year high overnight.

By 11:35 AM ET (1535 GMT), gold prices for delivery on the Comex exchange were flat at $1,694.15 a troy ounce, having earlier hit a high of $1,742.20 - the highest since 2012, at the height of fears that the dollar would be debased by the Federal Reserve’s quantitative easing and zero interest rate policy.

Spot gold fell 0.4% to $1,655.62 an ounce.

Silver futures rose 0.4% to $15.61 an ounce, while platinum futures rose 1.7% to $744.35 an ounce.

Easy monetary policies failed to generate the consumer price inflation feared by many at the time, although they did stoke an unprecedented boom in financial asset prices. Today, too, analysts warn that the initial effect of the Covid-19 outbreak will be deflationary rather than inflationary – as a sharp drop in personal incomes and a surge in uncertainty hang over consumer and business spending alike. JPMorgan (NYSE:JPM) CEO Jamie Dimon warned on Monday in his annual letter to shareholders that the U.S. is in for “a bad recession”.

U.S. small businesses sentiment fell in March by the most on record, according to the National Federation of Independent Business, whose optimism index tumbled 8.1 points to 96.4.

Nine of the 10 components that make up the gauge fell, notably the biggest-ever drop in businesses’ sales expectations.

U.S. government bond yields rose again on Tuesday as the market digested the prospect of another wave of Treasury issuance. House Speaker Nancy Pelosi was reported on Monday as telling colleagues that the House is preparing another $1 trillion package of economic support measures, likely to be financed overwhelmingly through new borrowing. The benchmark 10-Year yield rose eight basis points to 0.76%, its highest in over a week.

Elsewhere Tuesday, data from the People’s Bank of China showed that the Chinese central bank didn’t sell any of its monetary gold in March, despite heavy pressure on the yuan and a high degree of stress in Chinese markets overall.

At the end of the month, China held 62.64 million troy ounces, the same as at the end of February, despite a $60 billion drop in overall reserves that was largely the product of a revaluation of its non-dollar holdings.

Russia’s central bank, meanwhile, again delayed the publication of its weekly foreign reserves statement, even as pressure on the ruble eased in anticipation of a global deal to stabilize the crude oil market.

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