Gold holds above US$1,600 on fears of economic fallout from virus
BENGALURU: Gold prices held steady above the key US$1,600 (RM6,600) mark yesterday as an uptick in equities due to a drop in new virus cases was offset by fears of an economic fallout from the epidemic.
Autocatalyst metal palladium, meanwhile, scaled yet another record peak on a sustained supply shortfall.
Spot gold was little changed at US$1,603.20 per ounce by 0702 GMT, having surged to its highest since Jan 8 at US$1,605.26 earlier.
US gold futures rose 0.2% US$1,606.50.
Asian shares and US stock futures edged cautiously higher as investors tried to shake off worries about the epidemic.
“The big wave of risk-off has sort of dissipated right now, but still the economic fallout is buttressing the demand for gold,“Stephen Innes, chief market strategist at AxiCorp.
China reported 1,749 new cases, the lowest daily rise since Jan 29, bringing the total number of those infected to over 74,000, with 2,004 deaths.
The US dollar, also considered a safehaven, scaled a more than four-month high against key rival currencies.
“The stronger dollar is not really curbing the inflows to gold ... from an inflation perspective, a stronger US dollar is working against the US Federal Reserve’s inflation target and is pointing towards lower interest rates,“AxiCorp’s Innes said.
Investors await the minutes of the Federal Reserve’s Jan 28-29 policy meeting, due at 1900 GMT.
Lower interest rates reduce the opportunity cost of holding nonyielding bullion and also weigh on the US currency.
Indicative of investor sentiment, holdings of the world’s largest goldbacked exchange-traded fund, SPDR Gold Trust, rose 0.6% to 929.84 tonnes on Tuesday, their highest since Nov 11, 2016.
“The short-term dynamics are very difficult to tell simply because the market is in a position where it is considerably overbought and if we get (any) positive news it could possibly trigger a downside move (in gold),“added Axicorp’s Innes. – Reuters
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