February 04, 2020
Gold little changed as firm dollar offsets virus worries
(Reuters) - Gold prices were little changed on Tuesday as a firm dollar countered concerns about a rapidly spreading coronavirus outbreak in China and its economic fallout.
Spot gold was unchanged at $1,575.37 per ounce by 0534 GMT, after hitting its highest since Jan. 8 at $1,591.46 in the previous session. U.S. gold futures fell 0.2% to 1,579.70.
“It is the uncertainty around coronavirus that continues to be supportive for gold prices,” said ING analyst Warren Patterson, adding that the metal would remain fairly well-supported unless there is more clarity on what the impact will be on the Chinese as well as the global economy.
Hong Kong has reported its first death from the coronavirus, the second fatality outside mainland China from an outbreak that has killed 425 people, while Beijing allowed U.S. health experts into the country to help fight the fast-spreading flu-like virus.
The virus outbreak has prompted traders to begin pricing in a U.S. interest rate cut by June but has not swayed the views of Atlanta Federal Reserve Bank President Raphael Bostic, one of 17 Fed officials who set U.S. monetary policy.
Weighing on the metal, the dollar held firm against a basket of rival currencies, after a 0.4% gain in the previous session.
The greenback posted its biggest gain since Jan. 2 on Monday, boosted by a U.S. manufacturing survey that showed a rebound in January factory activity after five straight months of contraction amid a surge in new orders.
Asian stocks edged higher although cautious investors awaited further stimulus to boost China’s economy due to the onslaught of coronavirus over the past few days.
China’s central bank flooded the economy with cash while trimming some key lending rates, but analysts suspect more will have to be done to offset the economic fallout from the virus.
Worries over the impact of the virus are a bit of a concern for the market, said ING’s Patterson, adding that: “Still (we) see a general shift to safe-haven assets, reflected in ETF holdings with sizeable inflows that demonstrate the uncertainty in the market.”
Gold is considered a safe store of value during economic and political uncertainty.
Spot gold may look neutral in a range of $1,573-$1,582 per ounce, and an escape could suggest a direction, said Reuters technical analyst Wang Tao.
In other precious metals, palladium rose 0.4% to $2,329.50 an ounce, silver climbed 0.5% to $17.75, and platinum rose 0.6% to $972.09.