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Gold retreats from 7-year high, but coronavirus fears limit losses

On Monday, the metal rose as much as 2.8% to $1,688.66, its highest since January 2013

Reuters 

gold

prices fell on Tuesday as investors booked profits after the metal surged to a more than seven-year high in the previous session and as equities regained some footing, but a spike in cases outside China capped bullion's losses.

Spot slipped 0.7% to $1,649.70 per ounce by 0847 GMT, having slipped 1.7% at one point earlier in the session. U.S. futures fell 1.5% to $1,652. On Monday, the metal rose as much as 2.8% to $1,688.66, its highest since January 2013. "People are taking profits. Gold has been severely overbought in the last two weeks because of Covid-19 and expectations for easy monetary policy," CMC analyst Margaret Yang Yan said.

"It's a slight reversion of levels from yesterday but I won't say it's risk-on now, because of the virus. We still have a lot of opportunities ahead in terms of virus impact and after traders take in profits, buyers will come back to the market." Asian stock found some stability after a wave of early selling petered out and futures managed a solid bounce.

The death toll climbed to seven in Italy on Monday, while several Middle East countries were dealing with their first infections. "There are increasing concerns that the virus is becoming a global issue now. It would disrupt global supply chains everywhere and potentially put a cap on day-to-day economic activity," said Jeffrey Halley, senior market analyst at OANDA. The rapid spread of the virus beyond China has heightened fears over its impact on the global economy, driving some bets that the U.S. Federal Reserve will be pressed to cut rates to cushion the hit. If central banks react to the global spread by cutting interest rates or through further monetary easing, gold will benefit, ING analyst Warren Patterson said. While a rising dollar, which has also seen strong interest as a safe haven amid the outbreak, could temper gold's rally, it is unlikely to "hold it back too much," Patterson added. On the technical front, gold may retest a support at $1,639 per ounce, according to Reuters analyst Wang Tao.

Among other precious metals, palladium gained 1.7% to $2,673.46 per ounce. Silver fell 1.3% to $18.39 an ounce, having touched its highest since early September on Monday, while platinum inched up 0.2% to $964.99.

First Published: Tue, February 25 2020. 22:05 IST
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