Gold not budged by hopes of coronavirus abating
Support for metal still strong due to knock-on effects of pandemic and remaining tariffs after US-China deal’s first phase
Bengaluru — Gold was little changed on Wednesday, as equities rose after the number of new coronavirus cases fell, while uncertainty over the economic effect of the outbreak underpinned bullion. Spot gold was flat at $1,567.82/oz by 0348 GMT. US gold futures edged 0.1% higher to $1,571.20.
While the death toll exceeded 1,000, China’s foremost medical adviser on the epidemic said infections may be over by April, with the number of new cases already declining in places.
“Gold is consolidating as the current virus scare is evaporating,” Stephen Innes, chief market strategist at AxiCorp, said. However, the underlying support for gold remains due to factors including the negative knock-on effects of the virus, and the cumulative impact of existing tariffs after the US-China Phase 1 trade deal, Innes said.
The virus outbreak could reduce Chinese purchase of US farm products in 2020 under the Phase 1 trade deal, White House national security adviser Robert O’Brien said.
Also keeping gold in check, the US dollar stayed close to four-month highs after soaking up safe-haven flows as worries about the coronavirus coincided with recent data showing the US economy’s strength.
Meanwhile, Asian stocks inched up as investors felt the worst of the epidemic may have passed, but remained wary of its spread. The measures taken by Chinese authorities to avoid large-scale layoffs are “keeping a lid on gold prices as it would be positive for growth and bullish for equity markets,” AxiCorp's Innes said.
In the US, Federal Reserve chair Jerome Powell told Congress on Tuesday the US economy is in a good place, but cited the potential threat from the epidemic and concerns about the economy’s long-term health.
Gold, which is often used as insurance against economic risks, tends to appreciate on expectations of lower interest rates, which reduce the opportunity cost of holding nonyielding bullion.
Holdings of the world’s largest gold-backed exchange-traded fund SPDR Gold Trust rose 0.67% to 922.23 tonnes on Tuesday, its highest in more than three months.
Palladium rose 0.3% to $2,347.52/oz, silver shed 0.1% to $17.61, and platinum was unchanged at $968.84.
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