Gold prices climbed to their highest level in seven years on Thursday as an uptick in the number of coronavirus cases in South Korea fueled worries over the wider economic impact of the outbreak.
Spot gold rose 0.44% to $1,618.38 per ounce by 1:41 p.m. EST, after hitting its highest level since February 2013 at $1,623.45. U.S. gold futures settled up 0.5% at $1,620.50 per ounce.
“Now that gold has surpassed the $1,600 level, more investors and traders will take positions now,” said Michael Matousek, head trader at U.S. Global Investors.
“Coronavirus is definitely a factor but we have a bunch of other reasons like … central banks keeping (interest) rates negative, tariff-related issues with China and Europe,” he added.
The epidemic has disrupted China’s economic growth and a further spread to other countries could derail a “highly fragile” projected recovery in the global economy in 2020, the International Monetary Fund warned on Wednesday.
Even as the number of new coronavirus cases in China slowed, new research suggesting the virus was more contagious than previously thought added to the alarm.
Daegu, a city of 2.5 million people in South Korea, has become the latest victim of coronavirus outside China. South Korea now has 104 confirmed cases of the flu-like virus, and reported its first death.
Beijing cut the benchmark lending rate and is likely to roll out more measures to support an economy jolted by the virus crisis.
U.S. Fed policymakers also acknowledged new risks caused by the epidemic, but were cautiously optimistic about their ability to hold interest rates steady this year, minutes of the central bank’s last policy meeting showed on Wednesday.
“As long as the coronavirus problem is in the headlines, gold prices will be very well supported at current levels. If the situation deteriorates prices can even go higher,” said SP Angel analyst Sergey Raevskiy.
Data showed holdings of the world’s largest gold-backed exchange-traded fund, SPDR Gold Trust, rose 0.2% to 931.60 tonnes on Wednesday, their highest since November 2016.
“Gold is being driven chiefly by robust investment demand: Gold ETFs registered inflows for the 21st day of trading in a row yesterday, and speculative financial investors are likely to have further expanded their net long positions as well,” Commerzbank analysts said in a note.
Elsewhere, palladium was down 0.7% at $2,694.08 an ounce, having touched a record high of $2,841.54 in the previous session on supply deficit concerns.
Silver fell 0.3% to $18.34, while platinum slipped 3% to $975.36.
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