Analysis Tue Mar 24, 2020    |    Written by Kang Rois

Gold climbs higher to $1,550 area as Fed brings out big guns

• Fed launches open-ended QE to support economic activity.
• US Dollar Index pulls away from multi-year highs, holds above 102.
• Wall Street's main indexes extend slide on Monday.

The troy ounce of the precious metal erased more than $50 last week but erased all of its gains in a single day as investors seem to be reassessing their choice of safe-haven following the Fed's drastic policy action. As of writing, the XAU/USD pair was up 3.4% on a daily basis at $1,550.

USD loses strength on Fed's aggressive move

The Fed on Monday said it has launched an extensive range of new programs to confront disruptions to the economic activity in the face of the coronavirus outbreak. Further details of the announcement revealed that it will start buying treasuries and mortgage-backed securities in the "amounts needed," which is essentially seen as an unlimited quantitative easing program. 

The initial market reaction caused the greenback to come under strong selling pressure and provided a boost to the pair. 

Although it's too early to say, gold might be re-establishing its status as a safe-haven amid easing worries over USD shortage in funding markets.

On the other hand, Wall Street's main indexes failed to capitalize on this development and suffered heavy losses at the opening on Monday to show that investors are still not convinced that the global economic slowdown will be temporary. Reflecting the intense flight-to-safety, the 10-year US Treasury bond yield is erasing 12% on Monday. 

Technical levels to watch for

XAU/USD

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