Bullion has a long-standing reputation as a go-to asset in times of stress, offering a way to shield portfolios when markets swing away from risk. That said, there’s a chance during extreme turmoil investors sell gold, something seen on Friday and, before that, for a period in the 2008 financial crisis.

Investors were “cashing out to cover losses and meet margin calls in other markets,” RBC Capital Markets said in a note, referring to Friday’s drop. “We do not view this as a loss in faith in gold’s role as a ‘perceived safe haven’ or a fundamental shift in the attitude toward gold.”

Spot gold gained as much as 1.3% to $1,606.68 an ounce, and was at $1,600.06 at 11:28 a.m. in Singapore after trading lower in the initial period of the session. On Friday, prices fell as much as 5%.

Central Banks

Investors are assessing gold’s outlook amid signals that the Federal Reserve will join other global central banks in easing policy. Chairman Jerome Powell opened the door to a cut at the March 17-18 meeting by issuing a rare statement Friday pledging to “act as appropriate” to support the economy.

“With the coronavirus spreading globally and the Fed looking at the possibility of a rate cut, the upward momentum in gold prices is likely to remain intact,” said Howie Lee, an economist at Oversea-Chinese Banking Corp.

Goldman Sachs Group Inc. economists said they now expect the Fed to cut its key interest rate by 50 basis points this month, and flagged the possibility of a coordinated move with other policy makers.

Bank of Japan Governor Haruhiko Kuroda issued an emergency statement as the week began, saying the BOJ will “provide ample liquidity and ensure stability in financial markets through appropriate market operations and asset purchases.”

While gold prices sank on Friday, investors continued to buy into bullion-backed exchange-traded funds. The worldwide total expanded 8.6 tons to a record 2,634.4 tons, according to an initial tally compiled by Bloomberg News.

Among the signs of the economic pain being caused by the disease, Pacific Investment Management Co. said there may be a 6% contraction in China’s first quarter gross domestic product.