Gold jumps to over 1-week high as virus fears spark rush to safety

Gold climbed over 1% to a more than one-week high on Thursday as worries over the global spread of the coronavirus spurred safe-haven flows and raised hopes of further monetary policy easing by major central banks.

Spot gold had gained 1.4% to $1,657.78 per ounce by 09:59 a.m. EST (1459 GMT). U.S. gold futures jumped 1% to $1,658.80.

“Clearly as the equity markets are under pressure and there are more concerns about the coronavirus, so obviously we are seeing money flowing out of riskier assets into safe havens like gold,” said David Meger, director of metals trading at High Ridge Futures.

“In addition, we continue to view gold as a quintessential hedge against a flood of global central bank liquidity. Gold continues to lead the charge and continues to be our favourite alternative investment out there.”

Equity markets tanked after California declared an emergency over the epidemic as the death toll rose in the United States.

There are now more than 90,000 COVID-19 coronavirus cases globally, with over 3,000 deaths.

The International Monetary Fund said on Wednesday the global spread had crushed hopes for stronger growth this year, while a Fed report showed there were signs the epidemic had begun to weigh on U.S. business sentiment.

The U.S. Fed and Bank of Canada have both responded by cutting interest rates by 50 basis points. Markets in the euro zone are pricing in a 90% chance that the European Central Bank will cut its deposit rate next week.

“Gold’s macro argument is simple. The virus hit to global growth and low interest rates globally will keep gold prices climbing higher,” said Edward Moya, a senior market analyst at broker OANDA, in a note.

Further supporting bullion, the dollar index slipped 0.5% to a near two-month low against a basket major of currencies, while the U.S. 10-year treasury yield fell back below 1%.

Elsewhere, palladium dropped 3.6% to $2,484.86 per ounce.

Reuters

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Ed Moya

Ed Moya

Senior Market Analyst, The Americas at OANDA
With more than 20 years’ trading experience, Ed Moya is a senior market analyst with OANDA, producing up-to-the-minute intermarket analysis, coverage of geopolitical events, central bank policies and market reaction to corporate news. His particular expertise lies across a wide range of asset classes including FX, commodities, fixed income, stocks and cryptocurrencies. Over the course of his career, Ed has worked with some of the leading forex brokerages, research teams and news departments on Wall Street including Global Forex Trading, FX Solutions and Trading Advantage. Most recently he worked with TradeTheNews.com, where he provided market analysis on economic data and corporate news. Based in New York, Ed is a regular guest on several major financial television networks including CNBC, Bloomberg TV, Yahoo! Finance Live, Fox Business and Sky TV. His views are trusted by the world’s most renowned global newswires including Reuters, Bloomberg and the Associated Press, and he is regularly quoted in leading publications such as MSN, MarketWatch, Forbes, Breitbart, The New York Times and The Wall Street Journal. Ed holds a BA in Economics from Rutgers University.
Ed Moya