Pure gold ore is shown on the stone floor of a mine. Picture: 123RF/PHAWAT KHOMMAI
Pure gold ore is shown on the stone floor of a mine. Picture: 123RF/PHAWAT KHOMMAI

Bengaluru — Gold prices firmed on Wednesday, recovering from a sharp drop in the previous session, as safe-haven demand was boosted by worries over a fast-spreading coronavirus outbreak in China.

Spot gold was up 0.3% to $1,556.08/oz by 3.28am GMT, after declining 1.5% on Tuesday — the biggest since early November. US gold futures rose 0.3% to $1,560.00/oz.

“There’s an increase in demand [for gold] because of flight to safety with the coronavirus and concerns about [economic] growth,” said John Sharma, an economist at National Australia Bank.

“We are still witnessing deaths and quarantine problems. As long as deaths are around, there will still be increasing demand for gold.”

The death toll in China passed 490, as two US airlines suspended flights to Hong Kong following the first fatality there and 10 cases were confirmed on a quarantined Japanese cruise ship.

Gold is considered a safe haven in times of political and economic uncertainty.

Underpinning the metal further was a private sector survey that showed growth in China’s services sector slowed for a second straight month in January, a traditionally busy sales season.

Meanwhile, Asian stocks steadied by China’s efforts to support its economy jolted by the outbreak that is expected to have a devastating effect on first-quarter growth.

“Gold will be more towards $1,550-$1,575 range rather than $1,600, which looks a bit distant, unless there is a surge in the number of deaths [from the virus]," said Sharma.

The virus would delay a surge in US exports to China expected from the phase 1 trade deal set to take effect this month, the White House’s top economic adviser said on Tuesday.

Among other precious metals, palladium fell 0.3% to $2,426.23/oz, after touching a near two-week peak of $2,438.00/oz earlier in the session.

Silver inched up 0.2% to $17.61/oz, and platinum shed 0.2% to $961.49/oz.

Reuters