The prices of gold remain almost unchanged on Wednesday as the market waits for the release of the U.S. Federal Reserve’s monetary policy statement and evaluates the economic impact of the coronavirus outbreak in China. The prices of the yellow metal fell by 1% during yesterday’s trading session.
U.S. gold futures declined by 0.3% to $1,564.60 an ounce while spot gold prices remain little changed at $1,565.67 an ounce as of 0446 GMT.
The coronavirus, designated as 2019-nCoV, has already infected close to 6,000 people and claimed the lives of 132 people in China. There is limited information about the virus and it continues to spread quickly.
According to OANDA senior market analyst Jeffrey Halley, it is too early to tell the impact of the outbreak on China’s economy. If the situation extends to a month, it is likely to have an effect on economic growth. He also said that if the coronavirus problem escalates, it could push the precious metal to the $1,600/oz level.
The report of new coronavirus infected wiped out the gains made by the Asian equities market in the previous. It sent the Hong Kong stock market down by 2.3%, which had just resumed trading after the New Year break.
Another positive for the bullion is the U.S. Treasury yield curve’s inversion yesterday which roiled the markets since it usually signals a coming recession. However, the gold price is being kept in check by the firmer U.S. dollar. The greenback remains close to a two-month high and this makes the bullion more expensive for investors using other currencies.
Meanwhile, the markets are monitoring the release of the Fed’s policy statement due later today at 1900 GMT. The central bank is not expected to make any changes to the interest rates. But it is also expected to focus more on its excess reserves which are currently close to its lowest target range. The Feds wants to lift the effective federal funds rates.
UBS precious metals strategist Joni Teves said that given the low-interest-rate environment, she expects strategic inflows to be the main driver of the gold market this year. Gold continues to be considered as an ideal investment diversifier.