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Gold prices finished lower Wednesday, building on the prior session’s retreat, even as worries remain over the spread of coronavirus outside of China.
“It appears the bearish aspect of reduced consumer demand for the precious metals amid the potential for a slowdown in global economic growth is presently trumping the safe-haven demand aspects of the coronavirus scare,” said Jim Wyckoff, senior analyst at Kitco.com. “China, which is hit hardest by the outbreak, is a world leader for consumer gold demand.”
“It can also be correctly argued the gold market is seeing a corrective pullback from recent solid gains that pushed prices to a 7 yr high earlier this week,” said Mr. Wyckoff.
Gold for April delivery GCJ20, +0.62% on COMEX fell $6.90, or 0.4%, to settle at 1,643.10 oz. The precious Yellow metal marked a 7 yr high Monday as worries about COVID-19 sparked a global equity rout, prompting investors to move into traditional safe-havens.
March silver SIH20, +0.99% lost 0.357, or 2%, to end at 17.834 oz May SIK20, +0.98%, which is now the most active, lost 1.9% to settle at 17.914.
Analysts have tied the retreat by gold in part to positioning, noting that data had shown extremely high net Long speculative positions in gold futures ahead of the recent push to 7 yr highs. Still, the degree of the pullback in light of the continued selloff in equities was described as a surprise.
Bullion should continue to find more support from accommodative monetary policy worldwide, a rapidly shrinking pool of risk-free assets, and lower beta of traditional risk-off currencies even without triggering worst-case pandemic fears.