(Kitco News) - The Federal Reserve is unable to significantly calm market fears as it remains neutral on monetary policy but signals that they are monitoring the situation.
Late Friday afternoon Federal Reserve Chair Jerome Powell tried to strike an optimistic tone in a statement regarding the central bank's view on the impact the coronavirus is having on the U.S. and global economies.
"The fundamentals of the U.S. economy remain strong. However, the coronavirus poses evolving risks to economic activity. The Federal Reserve is closely monitoring developments and their implications for the economic outlook. We will use our tools and act as appropriate to support the economy," he said in the statement.
The statement hasn't had much impact on markets as investors continue to see a sharp sea of red in initial reaction. Gold prices remain sharply down. April gold futures last traded at $1,579.50 an ounce, down almost 4% on the day.
Meanwhile, equity markets are down 2% across the board on the day; the Dow Jones Industrial Average as dropped almost 4,000 points this week and is down around 14%. In bond markets, the U.S. 10-year yield is at a fresh record low at 1.15%.
Some economists have said that the Powell’s unexpected comments could signal a rate cut in March. The CME FedWatch Tool shows that markets are pricing in a more than 50% chance of a rate cut next month. Markets see a chance that interest rates fall to zero by the end of the year.
Commodity analysts have said that loser central bank monetary policy should continue to support gold prices in the long-term.
