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Gold spiked as the spread of the coronavirus globally spurred demand for haven assets.
Prices rose as Crude Oil tumbling. In the latest attempt at containment, China extended the week-long Lunar New Year holiday and banned all outgoing overseas group tours to avoid having travelers contribute to its spread.
President Xi’s government is under pressure to combat the outbreak that shows little sign of slowing down, with more than a 12 countries and territories reporting the illness within their borders.
While the return of risk aversion is supportive of safe haven assets like gold, investors are also assessing the extent to which the virus may keep consumers away from shops, damping the usual pick up in gold purchases during the holiday period.
News flow on the virus is pushing safe haven buying, in this kind of a environment, stock markets could tank and that fear is further adding to the risk-averse sentiment. The outlook is Bullish for gold, targeting 1,610 near term.
European futures retreated over 1% and S&P 500 contracts posted modest losses, while futures on Chinese shares fell more than 5%. 10-yr Treasury yields and WTI Crude Oil both hit their lowest levels since October, and JPY climbed.
“Markets are focused on news around the deadly coronavirus,” Bank of New Zealand said in a report. “There will clearly be a significant economic impact, centered in China. A Key question is the time it will take for the virus to be contained and one can only speculate at this stage.”
As concerns about the impact of coronavirus mount, investors have boosted holdings in ETFs backed by gold to the highest since November, with the assets now less than 25 tonnes shy of a record.
Adding to the momentum, the Fed is gearing up for its 1st rate-setting meeting this year, where it’s expected to maintain easy monetary policy, and the World Gold Council (WGC) will offer its assessment of global demand trends.
Spot gold traded 0.5% higher at 1,578.54 oz at 3:26p in Hong Kong. Silver rose 0.5% and Platinum fell.
Have a terrific week.
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