Gold fell over 1% on Tuesday as the metal’s rally to 7-year highs in the last session prompted profit-taking even as worries about the coronavirus kept investors anxious about the fate of global economy.
Spot gold slipped about 1% to $1,644.40 per ounce by 01:56 p.m. EST. U.S. gold futures settled down 1.6% at $1,650.
On Monday, the metal surged as much as 2.8% to $1,688.66, its highest since January 2013.
“Today’s move is merely a pause in the midst of an upswing,” said David Meger, director of metals trading at High Ridge Futures, adding investors were booking profits after the “dramatic rise on Monday.”
“The pillars of support for gold remain to be low rates by major central banks. Funds have been diversifying profit away from equity portfolios into the gold markets.”
Mainland China had 508 new confirmed cases, up from 409 on Sunday, bringing the total confirmed cases to 77,658.
The rapid spread of the virus beyond China has heightened fears over its impact on the global economy, driving some bets that the U.S. Federal Reserve will be pressed to cut interest rates to cushion the hit.
“The market is most certainly already in the process of pricing in additional rate cuts in the U.S., where the speculation about the March cut has started to attract some attention,” said Saxo Bank analyst Ole Hansen.
However, “the dollar could strengthen even further which slows gold’s approach, but major central banks are most certainly trying to do what they can to support the economies.”
Countries around the world are stepping up efforts to stop a pandemic of the virus that emerged in China and is spreading in Europe and the Middle East.
“With the virus spreading to other regions, and if China experiences a relapse and the drags on growth extend into April, gold could move to $1,650–1,700 per ounce,” UBS analysts wrote in a note.
Gold in euros and gold priced in sterling slid from all-time peaks hit on Monday.
Among other precious metals, palladium jumped 3% to $2,707 per ounce.
Silver fell 2.3% to $18.20 an ounce, having touched its highest since early September on Monday. Platinum slid 3.3% to $931.7.
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