Picture: 123RF/KTS DESIGN
Picture: 123RF/KTS DESIGN

Bengaluru — Gold edged back from the previous day’s near one-week high on Tuesday as European stocks surged to record highs and the dollar hit a four-month peak, with a drop in the number of new confirmed cases of coronavirus providing a glimmer of relief.

Spot gold was down 0.3% at $1,567.54 an ounce by 10.58am GMT, having touched its highest since Feb. 4 at $1,576.76 on Monday. US gold futures shed 0.5% to $1,571.10.

“Equities are recovering and the Chinese economy is trying to come back to normal ... so it’s not surprising to see risk-averse investments such as gold coming under pressure,” said Commerzbank analyst Eugen Weinberg.

With expectations of virus risks diminishing, “the impact to the Chinese economy and to some extent the world economy is likely to be only temporary”, he said.

European shares hit a record high, while Asian share markets followed Wall Street higher on Tuesday as the number of new coronavirus cases slowed in China and the country’s factories slowly returned to work.

China’s virus epidemic may peak in February then plateau before easing, the government’s top medical adviser on the outbreak said.

The virus has killed more than 1,000 in the world’s second-largest economy so far and threatened the country’s economic growth as companies struggled to return to work after an extended Lunar New Year holiday.

Further weighing on gold, the dollar rose to its highest since early October against a basket of rivals, making assets priced in the US unit more expensive for holders of other currencies.

Meanwhile, gold eased from a record peak of €1,444.76 an ounce hit in the previous session.

“We’ve this ad hoc, completely unexpected [virus] factor driving demand for gold, but ultimately the growth prospects are being revised down [and] central banks are still continuing to ease their monetary policy, so the drivers for higher gold prices are there,” said SP Angel analyst Sergey Raevskiy.

Market participants are now focused on US Federal Reserve chair Jerome Powell’s testimony before US Congress, after two Fed policymakers played down the effect of the virus on the domestic economy.

Last month, Powell flagged the virus outbreak as “significant”, with effects on the Chinese economy at least in the short term.

Among other precious metals, palladium fell 0.9% to $2,331.74, silver eased 0.2% to $17.71 and platinum edged 0.5% higher to $964.67.

Reuters

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