(Reuters) – Gold slid more than 1% on Tuesday as Chinese steps to mitigate the economic impact from the coronavirus epidemic drove some investors away from safe havens and back into riskier assets.
FILE PHOTO: Gold bars and coins are stacked in the safe deposit boxes room of the Pro Aurum gold house in Munich, Germany, August 14, 2019. REUTERS/Michael Dalder/File Photo
Spot gold was down 1.4% at $1,553.79 per ounce by 1555 GMT, after hitting its lowest since Jan. 22 at $1,550.75. U.S. gold futures fell 1.6% to $1,557.50.
“The dramatic move in global equity markets, especially in the U.S. markets, clearly indicates there is lesser concern about coronavirus denting GDP and we have a lesser need for safe havens,” said David Meger, director of metals trading at High Ridge Futures.
Wall Street built on a recovery in world stocks as fresh intervention by China’s central bank calmed investor nerves.
Beijing’s efforts included signing off on more government spending, tax relief and subsidies for virus-hit sectors, policy sources said.
The outbreak has undermined the country’s economic activity as cities are locked down, with travel restrictions and businesses closed.
Further, the dollar strengthened, making gold more expensive for buyers holding other currencies.
Nevertheless, some uncertainty remained about the extent of the impact on the Chinese and global economies.
“In case the impact of the virus is less than the market has priced in, it could lead to a correction in gold prices, but as long as we don’t see economic growth accelerate, gold prices will remain supported,” said Quantitative Commodity Research analyst Peter Fertig.
Some traders have also started to price in a cut to U.S. interest rates by June.
Lower interest rates reduce the opportunity cost of holding the non-yielding bullion.
However, gold should stay within a range of $1,550 to $1,600 an ounce ahead of more political and economic headlines, George Gero, managing director at RBC Wealth Management, said in a note.
On the economic front, new orders for U.S.-made goods rose 1.8% in December, beating analysts’ consensus forecast of a 1.2% gain.
Among other precious metals, palladium was up 4.2% at $2,417.50, after touching its highest since Jan. 27 at $2,425.
“Now that optimism has returned to financial markets, it seems that market participants have forgotten their fears of how the spread of the coronavirus might affect demand,” Commerzbank analysts said in a note.
“Nonetheless, the consequences for China, the main consumer of palladium, are likely to be very serious.”
Silver fell 0.4% to $17.59, while platinum was down 0.8% at $958.38.
Reporting by Diptendu Lahiri and Sumita Layek in Bengaluru; Editing by Richard Chang