Gold on track for biggest weekly gain since 2016

Bengaluru — Gold prices held steady on Friday but were on track to post their biggest weekly gain since February 2016 over fears that the global coronavirus outbreak could deal a hard blow to the world economy.

Spot gold was little changed at $1,669.13/oz by 2.45am GMT, having risen over 2% in the previous session. US gold futures edged higher by 0.2% to $1,671.00/oz.

“We’ve seen a consistent switch out of equities into gold as a consequence of the worsening macro backdrop, and that’s something gold will continue to see in the foreseeable future,” ANZ analyst Daniel Hynes said. “The worsening spread of Covid-19 has increased expectations from markets that central banks will continue to cut rates to stabilise confidence in the market and provide some sort of support.”

The metal has gained as much as 5.3% so far this week as worries over the coronavirus sent investors scurrying for safe-havens, with the US Federal Reserve issuing an emergency 50 basis point interest rate cut on Tuesday. Asian stocks on Friday followed Wall Street lower, while US 10-year Treasury yields fell to a record low, sending the dollar to a two-month low against key rivals.

Lower interest rates reduce the opportunity cost of holding non-yielding bullion, while a weaker dollar makes greenback-denominated gold cheaper for investors holding other currency. Globally, there have been over 96,500 cases and more than 3,300 deaths from the coronavirus.

Mainland China, where the virus was discovered in late 2019, reported 143 new confirmed cases of infection on Thursday. The widespread epidemic has forced many cities and countries to temporarily close industrial operations, while travel restrictions have weighed on service sectors. The epidemic poses “evolving risks” to the US economy and US central bank officials are monitoring developments closely, New York Federal Reserve president John Williams said on Thursday.

Palladium slid 1.8% to $2,486.49/oz. “Palladium continues to outperform platinum but we also [have] the issue around industrial demand from the auto sector, which is being hit pretty hard at the moment,” Hynes said.

Silver was down 0.5% to $17.33/oz. Platinum fell 0.7% to $858.61/oz.

Reuters