Coronavirus sends gold towards seven-year peak

Bengaluru — Gold climbed towards a seven-year peak on Wednesday as concerns over the global economic effect of the coronavirus epidemic boosted safe-haven interest, while palladium resumed its record rally driven by concerns over a supply shortfall.

Spot gold rose 0.5% to $1,609.63 an ounce by 10.57am GMT. The metal jumped to $1,610.72 earlier, its highest since January 8, when gold hit its highest in nearly seven years. US gold futures rose 0.6% to $1,612.90.

“We’re still concerned that the recovery of economic activity might take a little bit longer in China,” Julius Bär analyst Carsten Menke said. “On the ground, the impact seems to be stronger than currently reflected in the stock markets. Gold investors are taking a closer look at these developments that’s why prices are higher.”

Bullion held firm even as European shares hit a fresh record high on a decline in new cases of coronavirus in China, and as the dollar rose to a more than four-month high against rivals.

Markets were alarmed on Tuesday after iPhone maker Apple warned that its sales might fall because of slow ramp-ups in manufacturing facilities in China.

Gold in euros hit an all-time peak of €1,491.01/oz.

Investors await the minutes of the US Federal Reserve’s January 28-29 policy meeting, due at 7pm GMT. Lower interest rates reduce the opportunity cost of holding non-yielding bullion.

Indicative of investor sentiment, holdings of the world’s largest gold-backed exchange-traded fund (ETF), SPDR Gold Trust, rose 0.6% to 929.84 tonnes on Tuesday, their highest since November 11, 2016.

In other metals, palladium scaled a record high of $2,841.54 an ounce and was last up 5.2% at $2,771.77. The automotive catalyst metal, which gained 54% in 2019 on supply shortages, will be in a substantial deficit in 2020 as well, Anglo American Platinum said.

“Mine supply in not able to catch up … despite the disappointing trend in Chinese and European car sales, tight emission norms keeps the market in deficit … and this is visible in dwindling ground stocks,” UBS commodities analyst Giovanni Staunovo said.

Ongoing power outages in SA — one of the largest producers of the metal — “just further aggravate the situation and is a supportive element”, Staunovo said.

Silver gained 1.1% to $18.36, having earlier hit a more than one-month high at $18.39, while platinum rose 2.1% to $1,012.69.

Reuters