Gold slips from seven-year high as China tries to limit effect of virus

Bengaluru — Gold prices fell slightly on Thursday, after hitting their highest level since March 2013 in the previous session, as Chinese stimulus measures to cushion the economic effect of the coronavirus outbreak stoked investors to opt for riskier assets.

Spot gold was down 0.1% at $1,609.59/oz, as of 2.53am GMT. Bullion rose to an intraday high of $1,612.62 in the previous session, the highest since March 25 2013. US gold futures were flat at $1,612.20.

It seems to be a bit more corrective mostly because … it’s not just in gold that we are seeing a bit of a walk back in risk-off dynamics, but across a variety of assets,” said DailyFx currency strategist Ilya Spivak.

Asian equities inched higher, supported by a fall in coronavirus cases and expectations of more stimulus from China. China’s central Hubei province had 349 new confirmed cases of coronavirus on Wednesday, the province’s health commission said, down from 1,693 a day earlier and the lowest since January 25, though it was accompanied by a change in methodology.

In line with market expectations, China cut its benchmark lending rate to support an economy hit by the epidemic. “Though China’s announcement may give us some fireworks in the near-term, most of global transaction are done in US dollar, so what matters here is what the Federal Reserve is doing,” Spivak said.

US Fed policymakers were cautiously optimistic about their ability to hold interest rates steady in 2020, minutes of the central bank’s last policy meeting showed on Wednesday, even as they acknowledged new risks caused by the epidemic. The US dollar, also considered a safe haven, slipped from a nearly three-year high scaled in the previous session. Lower interest rates reduce the opportunity cost of holding non-yielding bullion.

“Short-term, gold prices should stay supported and test new highs as growth risks are reassessed, but absolute returns may be limited if coronavirus-related disruptions are limited to 1Q,” aUBS analyst said in a note dated February 19.

Elsewhere, deficit-hit palladium advanced 0.8% to $2,735.90/oz, having touched a record high of $2,841.54 in the previous session. Silver was down 0.3% at $18.34, but hovered near its highest level in more than a month hit on Wednesday, while platinum fell 0.7% to $998. 

Reuters