Gold. Picture: REUTERS
Gold. Picture: REUTERS

Bengaluru — Gold edged lower on Thursday after China announced more measures to limit the economic effect from the coronavirus epidemic, although a rise in the number of new cases in South Korea kept bullion close to a near seven-year peak.

Spot gold was down 0.1% at $1,610.31 an ounce, as of 10.49am GMT. US gold futures rose 0.1% to $1,613.30.

Gold rose to its highest since March 2013 at $1,612.62 in the previous session on concerns about the economic effect of the virus outbreak.

“We are seeing some profit taking after the last run up in the prices ... overall the environment is very favourable for gold prices,” said SP Angel analyst Sergey Raevskiy.

Even as the number of new coronavirus cases in China slowed, a spike in new infections and a first death in South Korea intensified fears that the disease could spread more widely.

“As long as the coronavirus problem is in the headlines, gold prices will be very well supported at current levels, if the situation deteriorates prices can even go higher,” Raevskiy said.

China cut the benchmark lending rate and banks in Shanghai have issued 1.31-billion yuan ($186.8m) in cheap loans to 48 key firms to support an economy jolted by the crisis. The world’s second largest economy is likely to roll out more support measures, analysts said.

US Fed policymakers also acknowledged new risks caused by the epidemic, but were cautiously optimistic about their ability to hold interest rates steady this year, minutes of the central bank’s last policy meeting showed on Wednesday.

“Gold is being driven chiefly by robust investment demand: gold exchange-traded funds (ETFs) registered inflows for the 21st day of trading in a row yesterday, and speculative financial investors are likely to have further expanded their net long positions as well,” Commerzbank analysts said in a note.

Holdings of the world’s largest gold-backed ETF, SPDR Gold Trust, rose 0.2% to 931.60 tonnes on Wednesday, their highest since November 2016.

On the technical front, “$1,600 an ounce is a good support [for gold], while resistance lies at $1,613-$1,615,” said Afshin Nabavi, senior vice-president at precious metals trader MKS.

In other metals, palladium rose 0.1% to $2,716.67 an ounce, having touched a record high of $2,841.54 in the previous session on supply deficit concerns. Silver shed 0.7% to $18.27, while platinum slipped 1% to $995.88.

Reuters