Gold rose overnight as scaling concerns over a coronavirus outbreak in China and its impact on global economy soured sentiments for riskier assets, propping up demand for the safe-haven asset.
Spot gold was up 0.4 per cent at $US1,564.13 per ounce. US gold futures settled up 0.6 per cent at $US1,565.40 per ounce.
“Coronavirus has led people to gold because there is an anticipation of a lot of potential turmoil in the economies that are affected,” said Jeffrey Sica, founder of Circle Squared Alternative Investments.
“It is adding a level of uncertainty to the overall market that is forcing people to consider more of safe haven in the event that this does becomes a greater epidemic.”
The Chinese government put millions of people in two cities in lockdown as the death toll reached 18, and 634 people were infected.
Coronavirus fears led to the biggest tumble in Chinese stocks in more than eight months, which in turn weighed on global equity markets.
Further benefiting bullion’s appeal, US yields tumbled to multi-week lows.
Lower bond yields reduce the opportunity cost of holding non-interest bearing gold.
“Equities are slightly softer so that is stoking some interest in the metal,” said Bob Haberkorn, senior market strategist at RJO Futures.
“But absence of any geopolitical risk in the short term is keeping gold prices in check. The European Central Bank meeting did not move the needle too much.”
The European Central Bank kept interest rates unchanged at its latest policy meeting and launched a “strategic review” of its inflation goal and tools.
Gold, considered a safe store of value in times of political and economic uncertainty, climbed to a near seven-year peak of $US1,610.90 on Jan. 8 after an escalation in US-Iran tensions. It has held above $US1,550 for the most part ever since.
Focus will now shift to the US Federal Reserve’s first meeting of the year scheduled for January 28-29.
Spot gold is biased to revisit its January 21 low of $US1,545.96, looking shaky around a resistance at $US1,564, said Reuters technical analyst Wang Tao.
Among other precious metals, palladium fell 0.6 per cent to $US2,457.51 per ounce, silver eased 0.1 per cent to $US17.80 and platinum dipped 0.7 per cent to $US1,004.83.