Gold benefits from worry about coronavirus

Bengaluru — Gold edged up on Thursday on safe-haven buying fuelled by worries about the fast-spreading coronavirus, but a rise in equity markets limited bullion’s gains.

Spot gold inched higher by 0.2% to $1,639.44/oz by 3.35am GMT. US gold futures were up 0.2% to $1,640.10.

“When we see support for both gold and the dollar, it’s an indication of safe-haven desire from investors,” said Michael McCarthy, chief market strategist at CMC Markets.

The dollar recovered following recent declines, finding support from robust jobs data from the US on Wednesday. The US Federal Reserve’s surprise interest rate cut on Tuesday to shield the world’s largest economy from the economic effect of the epidemic also supported non-yielding bullion.

Equities too latched on to global measures to battle the fast-spreading virus outbreak, with Asian shares tracking strong overnight gains on Wall Street following the strong performance of former US vice-president Joe Biden in the Democratic nomination campaign.

“If this (equity) rally continues for three to four days, markets could take that as an all-clear in terms of economic impact of the virus and we might see pressure on gold. It’s a very volatile situation,” McCarthy said.

However, the virus risks continued to support safe-haven interest. The IMF said on Wednesday the global spread has crushed the hope for stronger growth in 2020, while a Fed report showed there are signs the epidemic has begun to weigh on business sentiment in the US. Investors are now waiting to see whether the European Central Bank would also announce new stimulus, with eurozone markets pricing in a 90% chance of deposit rate reduction next week.

In other metals, palladium slipped 1.7% to $2,532.40/oz. “The auto sector supply chain will be impacted by Covid-19. Although this demand shock is expected to have limited impact on palladium due to structural deficit backdrop, we see room for further setbacks following the recent rally,” ANZ Bank analysts said in a note.

The autocatalyst slumped as much as 13% on February 28, after a record run to an all-time high of $2,875.50 on February 27 due to a stark supply shortfall. Silver inched up 0.2% to $17.21/oz, while platinum shed 0.4% to $868.79.

Reuters

Source: businesslive.co.za