The upward trend in gold prices was checked by a stronger U.S. dollar which reached near its two-month high. The rise of the greenback outweighed the effects of the coronavirus outbreak in China which lifted the demand for safe-haven investments.
U.S. gold futures inched higher by 0.1% to $1,578.10 an ounce. Spot gold, which hit close to a three-week high yesterday, dropped by 0.1% to $1,579.38 an ounce as of 0456 GMT.
According to MKS PAMP analysts, the yellow metal appears to be consolidating its gains in the previous sessions. Its price rally was also impeded by the fact that several traders went on holiday to celebrate the Lunar New Year. This keeps bullion within the $1,580/oz level.
National Australia Bank economist John Sharma added that the growing fears about the impact of the coronavirus on the Chinese economy, officially called “2019-nCoV,” is supporting the precious metal at the $1,580/oz level. He expects the bullion to be in the $1,5570-$1,590/oz range since there are a lot of variables and factors related to the coronavirus that is still unknown. But he believes it is possible to climb to $1,600/oz.
During the past four trading sessions, the coronavirus outbreak roiled the financial markets. It lifted gold prices and led to an extended global selloff in the equities markets. The Chinese government has already stepped up measures to control the virus and prevent transmission by extended the New Year holidays to February 2 and imposing travel bans. But some experts question whether China can contain 2019-nCoV.
The Chinese National Health Commission said that the number of confirmed cases has increased from 2,835 yesterday to 4,515 today. And the death toll has increased from 81 from 106. The virus has also spread to more than 10 countries including the U.S., Canada, France, Sri Lanka and Cambodia. The U.S. and Canada have issued a warning against nonessential travels to China.
Meanwhile, investors and traders will be keeping a tab on the first meeting of the U.S. Federal Reserve for 2020 which is scheduled to start later today. The Feds is not expected to touch interest rates.
In a related development, the holdings of SPDR Gold Trust, the largest gold-backed exchange-traded fund in the world declined by 0.13% to 899.41 tons yesterday.