Gold futures marked their highest settlement in over two weeks on Thursday, as the spread of the coronavirus in Asia fed risk-off sentiment among traders, pressuring global stock markets and U.S. bond yields, and boosting haven demand for the precious metal.
“Negative action is U.S. equities drives Treasury yields lower due partly to safe haven buying,” Michael Armbruster, managing partner at Altavest, told MarketWatch. “Falling treasury yields and the search for a safe haven are both very bullish for gold.”
Stock markets in Asia fell, while U.S. stocks traded lower Thursday as gold futures settled. The 10-year Treasury note yield TMUBMUSD10Y, +0.70% was down 3.8 basis points to 1.730%.
Against that backdrop, Gold for February delivery GCG20, -0.33% on Comex climbed by $8.70, or 0.6%, to settle at $1,565.40 an ounce. That was the highest most-active contract settlement since Jan. 7, according to FactSet data.
“Appetite towards the precious metal should remain supported by growing fears over the coronavirus outbreak in China,” said Lukman Otunuga, senior research analyst at FXTM. “The general uncertainty is likely to accelerate the flight to safety with gold seen testing $1568 in the short term,” but if $1,555 proves to be an unreliable support level, prices could slip back towards $1,545, he said.
The fast-moving influenza has now spread from China to Singapore during Lunar New Year, a key travel and gold-buying period in the Asian region. Singapore on Thursday confirmed its first case of the illness, the Channel News Asia reported.
On Thursday, Beijing locked down additional cities in an effort to contain the spread of the disease. Chinese officials have so far quarantined Huanggang, a city of 7.5 million people, while a smaller city Ezhou, with population of million, said it also would restrict travel, the Wall Street Journal reported. Those lock downs follow reports earlier that officials in Wuhan, a city of 11 million people, had instituted travel restrictions.
Thus far, the outbreak has sickened more than 500 people in China and claimed at least 17 lives, according to official reports. The World Health Organization on Thursday, however, said the coronavirus outbreak in China is an emergency for the nation, but not yet a global emergency.
Gold tends to gain during periods of market fear but the metal also faces pressure from worries that physical buying will be harmed by the outbreak.
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On the other hand, Rob Haworth, senior investment strategist at U.S. Bank Wealth Management, said the biggest influence on gold is “really macroeconomic rather than virus-driven.”
“The driver of gold prices for much of last year was the growth in zero and negative-yielding debt,” he said. “Further upside in 2020 is likely to be driven by easing-bias of the Federal Reserve and a weaker U.S. dollar.”
Market participants also were digesting monetary policy from European Central Bank President Christine Lagarde.
The European Central Bank, as expected, left interest rates unchanged on Thursday and maintained its commitment to purchasing 20 billion euros ($22.8 billion) a month in bonds. The ECB’s deposit rate stands at -0.5%, while its main refinancing operations rate holds at 0%.
In a statement, the ECB repeated that its Governing Council expects rates to remain at present or lower levels until there are solid signs that stubbornly low inflation is on track to converge with the bank’s target of near, but below, 2%.
“The statement leans a bit easy on monetary policy as it said the ECB’s bond-buying program will continue ‘as long as necessary,’” Jim Wyckoff, senior analyst at Kitco.com, told MarketWatch.
Meanwhile, “industrial metals will trade with a softer bias on global spread of coronavirus,” Chintan Karnani, chief market analyst at Insignia Consultants, told MarketWatch. He noted that China’s markets will be closed from Friday to Jan. 30 for the holidays.
Among the industrial metals, March silver SIH20, -0.22% settled nearly flat at $17.829 an ounce and March copper HGH20, +0.00% lost 3.9 cents, or 1.4%, at $2.726 a pound.
April platinum PLJ20, -0.03% fell by 1.4% to $1,007.30 an ounce, while March palladium PAH20, +0.52%, which settled at another record Wednesday, shed 0.3% to $2,329 an ounce.