Dollar eases from 4-month high, gold gains

LONDON: Gold gained on Thursday after a sharp rise in new coronavirus cases and deaths in China dampened risk sentiment, prompting investors to buy the metal.

Spot gold was up 0.6 per cent to $1,574.41 per ounce at 1029 GMT and US gold futures were 0.4 per cent higher at $1,577.90.

“This spike in the numbers has just knocked the wind out of the sizeable bet...so, we are seeing risk markets cool off and gold is catching some bids,” OANDA analyst Craig Erlam said.

After reports of a decline in new coronavirus cases, China said there had been a record rise in deaths and cases under a new diagnostic method, a potential threat to the global economic outlook.

A rally in stock markets reversed after health officials in Hubei reported 242 people had died from the virus on Wednesday, the fastest daily rise so far.

The dollar eased from a four-month peak against a basket of currencies, further increasing gold’s appeal. China’s Hubei province also extended a work suspension and asked all enterprises not to reopen before the end of Feb. 20.

“There will be spillover particularly through big export and import markets... but those impacts are going to be short-term because once people start returning to their normal lives, the economy will bounce back,” Erlam said.

Federal Reserve Chair Jerome Powell on Wednesday reiterated his confidence in the US economic outlook, despite some drag “soon” from the coronavirus epidemic.

“We’ve got some short term support from this issue in China, although factors such as low US interest rates, higher market volatility due to the late economic cycle and upcoming presidential elections should continue to support gold,” said UBS commodities analyst Giovanni Staunovo.

Palladium shed 0.9 per cent to $2,384.39 per ounce, having hit a one-week peak earlier in the session.