Gold slightly down but held firm by virus volatility
Palladium jumped 1.1%, silver fell 0.7% while platinum rose 0.1%
Bengaluru — Gold edged down on Tuesday from the previous session’s near three-week high as equities regained some ground, but concerns that the coronavirus outbreak could affect the global economy cushioned safe-haven bullion’s losses.
Spot gold was down 0.2% to $1,578.13 an ounce as of 12.02pm GMT, having touched its highest since January 8 on Monday. US gold futures were steady at $1,577.40.
“The flight to safety is not continuing today. Equity markets have stabilised, European equities are broadly flat, so the wave of risk-aversion that swept across the financial markets seems to be off,” said Julius Bär analyst Carsten Menke.
European markets rebounded early after the previous day’s thumping, while the dollar rose to a near two-month high.
However, concerns that the coronavirus outbreak could hinder the global economy persist, Menke said, adding that reactions to the spreading virus had been very different across markets and the decline in oil prices suggested a slowdown of economic activity in China.
Gold is seen as a safe-haven during times of economic and political uncertainties.
The death toll from the virus has reached 106 in China and some health experts question whether Beijing can contain the virus, which has spread from the city of Wuhan to more than 10 countries. The outbreak has prompted authorities to impose travel restrictions and extend the Lunar New Year holidays, which helped bullion rise for the past four sessions.
“Fears over the Wuhan virus have driven the rally [in gold], but it appears that investors much prefer the safety of high-grade government bonds to the gold,” Jeffrey Halley, senior market analyst at Oanda, said in a note.
Benchmark US 10-year treasury yields fell to their lowest since October 10. Government bonds are also considered a safe-haven asset during times of economic and political uncertainty.
Also on investors’ radar was the US Federal Reserve’s first policy meeting of the year, scheduled to start later in the day. Fed funds futures show traders expect the US central bank to keep interest rates unchanged. Lower interest rates reduce the opportunity cost of holding non-yielding bullion.
In other metals, palladium jumped 1.1% to $2,292.89 an ounce, having declined about 7% in the previous session. “Palladium is already recouping some of its losses again this morning. [However], we assume that the correction will continue, as the upswing beforehand was exaggerated, in our opinion,” Commerzbank analyst said in a note.
Silver fell 0.7% to $17.96, while platinum rose 0.1% to $983.98.