Gold holds near two-week high on uncertainty over virus impact

Tuesday, 18 February 2020 00:00 -     - {{hitsCtrl.values.hits}}

Reuters: Gold prices yesterday held near a two-week high scaled in the previous session as uncertainty prevailed over the impact of the coronavirus outbreak on the global economy.

Spot gold was little changed at $ 1,582.08 per ounce, as of 0701 GMT, having touched its highest since 3 February at $ 1,584.65 on Friday. US gold futures were down about 0.1% at $ 1,585.30.

“Gold is holding firm at high prices as uncertainty around coronavirus remains high, while the economic impact is still unclear,” said CMC Markets Chief Market Strategist Michael McCarthy.

The death toll from the outbreak in mainland China reached 1,770 by Sunday, up by 105 from the previous day, the country’s National Health Commission.

“Given the extent of the impact of the coronavirus in China, gold physical demand is likely to suffer. (But) it is too early to estimate the effects,” UBS said in a note dated 14 February.

Premiums for physical gold in China, the world’s biggest bullion consumer, slid to their lowest since at least July 2018 last week.

The epidemic pushed Singapore to downgrade its 2020 economic growth forecast, while a Reuters poll showed Japanese manufacturers remained pessimistic in February.

The US Federal Reserve had also flagged concerns regarding the potential impact on the US economy.

Cleveland Fed Bank President Loretta Mester said on Friday the epidemic could be a drag on the US economy this quarter.

“Sentiment is friendly and there is an underlying bias to be long. For now, investors wait for fresh catalysts and/or more attractive levels to reengage,” UBS said in the note.

Speculators increased their bullish positions on COMEX gold in the week to 11 February.

Asian shares, however, moved back toward a three-week high on China’s efforts to cushion the blow from the virus, while the dollar .DXY hovered near a more-than four-month high.

“The dollar normally works against the gold price, but the fact that gold did rise despite that goes to say that it (dollar) doesn’t have much impact on gold at the moment,” CMC’s McCarthy said, adding, the strong technical resistance of $ 1,590 is “limiting the enthusiasm in the market.”

Elsewhere, palladium rose 0.6% to $ 2,446.39 an ounce, silver was up 0.6% at $ 17.83, while platinum gained 0.6% to $ 968.69.

Trading is expected to be light as financial markets in the United States will be shut for a public holiday.