Gold retreats from high as China’s central bank injects liquidity into markets

Bengaluru — Gold eased on Monday after scaling a near four-week peak, as China’s central bank injected liquidity into its markets to help support companies hit by a coronavirus epidemic, with a stronger dollar holding back bullion as well.

Chinese authorities have pledged to use various monetary policy tools to ensure liquidity remains ample and to support companies affected by the outbreak in Wuhan, which has so far claimed more than 350 lives.

Spot gold fell 0.4% to $1,582.82 per ounce by 3.45am, having gained more than 1% in the previous session. US gold futures edged 0.1% higher to $1,588.80.

The coronavirus epidemic has claimed 361 lives so far in China, and a first death outside the country was reported in the Philippines, as investors braced for volatility in Chinese markets as they reopen after the Lunar New Year break.

China’s central bank said it will inject ¥1.2-trillion worth of liquidity into the markets via reverse repo operations on Monday.

The dollar also firmed on Monday making gold expensive for holders of other currencies.

Adding to risks

Asian markets slid on fears over the hit to world growth from the rapidly spreading coronavirus.

China’s factory activity expanded at its slowest pace in five months in January, with the virus adding to the risks facing the world’s second-largest economy, a private survey showed on Monday.

Total gold imports by top consumer China more than trebled in December 2019 from the previous month, but were down 28% on a yearly basis, data from the country’s customs website showed on Friday.

Activity on physical gold markets in major Asian hubs dwindled last week as the coronavirus epidemic took a toll on demand, especially with China out of action.

Hedge funds and money managers cut their bullish positions in Comex gold contracts in the week to January 28, data showed on Friday.

Holdings of the world’s largest gold-backed exchange-traded fund, SPDR Gold Trust, fell 0.03% to 903.21 tons on Friday.

Palladium rose 0.4% to $2,286.71 an ounce, silver fell 0.7% to $17.91, and platinum rose 0.7% to $963.27.

Reuters