Gold Near One-Week Low as Coronavirus Fears Ease

Gold prices eased to a near one-week low on Wednesday as risk sentiment improved after a drop in the number of new coronavirus cases comforted markets that the epidemic’s effects could be contained.

Spot gold was steady at $1,567.77 per ounce by 1:40 p.m. EST, having touched its lowest level since Feb. 6 at $1,561.16 earlier.

U.S. gold futures settled 0.1% higher at $1,571.60.

“It’s basically just risk-on (sentiment) here. Some of the coronavirus fears seem to be fading a little bit and safe-haven buyers, who were buying gold, are starting to unwind some positions,” said Ryan McKay, a commodity strategist at TD Securities.

“Gold is going to continue to trade range-bound … but the underlying factor that’s supporting gold is the Federal Reserve and the central banks globally, especially when the interest rates have been kept really low.”

Investors’ appetite for riskier assets grew as a drop in the number of new coronavirus cases and the Federal Reserve chairman’s optimistic view of the economy lifted world stocks for a third day.

China reported its lowest number of new virus cases since late January, lending weight to a prediction from its senior medical adviser that the outbreak might be over by April.

Also limiting gold’s appeal, the dollar held near a four-month high against a basket of rivals, making the metal expensive for investors holding other currencies.

Fed Chair Jerome Powell on Tuesday told Congress the U.S. economy was in a good place, but cited the potential threat from the virus epidemic and concerns about the economy’s long-term health.

However, it was still unclear to what extent economic growth would take a hit from the fast-spreading virus that has killed more than 1,100 people, shuttered businesses in China and roiled financial markets since late January.

“With a plethora of global risk simmering on the backburner — supply chains and demand contraction notwithstanding, I still think it’s too early to downgrade Covid-19 to a nasty case of the sniffles and gold will remain bid on a dip,” Stephen Innes, chief market strategist at AxiCorp, said in a note.

Holdings of the world’s largest gold-backed exchange-traded fund, SPDR Gold Trust, rose 0.67% to 922.23 tonnes on Tuesday, the highest in over three months.

In other precious metals, palladium gained 2.4% to $2,396.68 an ounce, silver fell 0.7% to a one-week low of $17.50 and platinum dipped 0.6% to $963.43.