2020.03.0210:25:00UTC+00Gold Rallies Amid Stimulus Bets

Gold prices rose sharply on Monday as investors grew optimistic that major central banks will cut interest rates to support the global economy.

Spot gold surged 1.6 percent to $1,609.85 per ounce, while U.S. gold futures were up as much as 2.9 percent at $1,611.45.

Gold prices plunged over 4.5 percent on Friday, marking the worst selloff in roughly seven years, as investors liquidated positions to meet margin calls in other assets.

Equities bounced back today from last week's heavy selloff as weak China data helped spur bets that major central banks will step in to counter the impact of the coronavirus epidemic on global growth.

China's Markit/Caixin manufacturing Purchasing Managers' Index (PMI) dropped to 40.3 in February, falling well below expectations of a reading of 45.7. The official PMI dropped to 35.7 in the month - the lowest level on record.

The non-manufacturing PMI tumbled to 29.6 last month, largely due to the coronavirus lockdown in most provinces that inhibited business activities.

The U.S. Federal Reserve is likely to join other global central banks in cutting interest rates aggressively in response to the coronavirus scare, Goldman Sachs economists said Sunday.

The Bank of Japan signaled today that it will make every effort to ensure stability in financial markets roiled by the coronavirus outbreak.

The Bank of England said it would take all necessary steps to maintain market stability.

Markets are also pricing in another cut to the ECB's key interest rate, which has been negative since 2014.