Abu Dhabi, UAEMonday 6 April 2020

Gold tops $1,600 as concerns over virus stir economic growth fears

The precious metal is trading near the highest level since 2013 as palladium continues record-breaking rally

US gold futures gained 0.9 per cent to $1,687.80 per ounce. Bloomberg    
US gold futures gained 0.9 per cent to $1,687.80 per ounce. Bloomberg    

Gold prices held above the key $1,600 (Dh5,876) mark on Wednesday, trading near the highest level since 2013, on concerns over the spread of the coronavirus and how it is affecting global growth.

Palladium topped $2,700 an ounce as it continued its record-breaking rally.

Spot gold was little changed at $1,601.88 an ounce at 7:46am UAE time. In the previous session, bullion prices surged 1.3 per cent to their highest since January 8 at $1,605.10, as Apple warned that the spread of the virus and efforts to curb it would have its sales missing forecasts.

US gold futures were up 0.1 per cent to $1,604.80.

Asian shares and US stock futures cautiously edged 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, told Reuters.

China’s death toll from the disease topped 2,000, while the province at the centre of the outbreak reported fewer additional cases.

The flight to safety has benefited haven assets, with the rally spilling over to the palladium market, where a multiyear deficit is expected to widen in 2020. Palladium climbed 3 per cent to $2,709.10 an ounce, an all-time high.

Gold is up 5.6 per cent this year as investors assess the impact of the disease on economic growth and appetite for risk amid speculation that the Federal Reserve will feel increased pressure to reduce interest rates. The US central bank has said the effects of the virus have presented a “new risk” to the outlook and traders will study minutes from the Fed’s latest meeting, due later Wednesday, for any hint of a dovish tone.

The US dollar, also considered a safe-haven during times of economic and political uncertainties, stayed above the more than four-month high against key rivals.

"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," Mr Innes said.

Spot gold prices had touched $1,611.42 in early January, the highest since 2013, as geopolitical tensions flared. The unfolding health emergency has seen holdings in global exchange-traded funds backed by bullion expand to a record.

Holdings of the world's largest gold-backed exchange-traded fund, SPDR Gold Trust, rose 0.6 per cent to 929.84 tonnes on Tuesday, their highest since November 2016.

Updated: February 19, 2020 04:10 PM

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