Gold extends gains as coronavirus prompts Fed to trim rates by 50 bps

Gold prices rose on Wednesday, extending gains from a 3 per cent rise in the previous session as the US Federal Reserve slashed its benchmark interest rate to cushion the economic impact from the fast-spreading coronavirus.

Spot gold climbed 0.3 per cent to $1,643.76 per ounce by 0257 GMT, having registered its biggest one-day percentage gain since 2016 on Tuesday. US gold futures gained 0.1 per cent to $1,645.30.

The Fed trimmed interest rates by 50 basis points on Tuesday in an emergency move to safeguard the world's largest economy from the impact of the epidemic.

"Last night's momentum is still being carried on in the Asian session this morning. But the rate cut is more likely priced in, so the upside (in gold) is limited for now," CMC Markets analyst Margaret Yang Yan said.

The rate cut was the US central bank's first outside of a regularly scheduled policy meeting since 2008 at the height of the financial crisis.

"If the Fed cuts rates too deep, it would give a very strong signal that we are in a crisis," CMC's Yan said, adding that the Fed might maintain status quo in its March meeting and gauge the economy's performance before taking further steps.

Lower interest rates reduce the opportunity cost of holding non-yielding bullion while weighing on Treasury yields and the dollar.

The US 10-year Treasury yields hovered near record lows touched in the previous session, while the dollar held close to a two-month low touched on Tuesday.

However, the emergency cut didn't calm investor nerves as all three major US stock indexes closed nearly 3 per cent lower overnight, while Asian shares wobbled on Wednesday.

Investors are awaiting the release of the US ISM non-manufacturing PMI data and the Fed's Beige Book of economic condition, both due later in the day.

Following the Fed's footsteps, the Hong Kong Monetary Authority lowered its base rate charged through the overnight discount window by 50 basis points.

Among other precious metals, palladium fell 0.7 per cent to $2,484.64 per ounce, while platinum was up 0.9 per cent at 882.50. Silver rose 0.2 per cent to $17.21 an ounce.

Demand for platinum from the auto industry will rise this year for the first time since 2016 but it won't be enough to offset a decline in investment buying, leaving the global market in surplus again, the World Platinum Investment Council said.