Daily Nuggets: Gold Slides From 7-Year High, Coronavirus Concerns Persist

February 25, 2020

New York (Feb 25)  Gold prices slid nearly 1% on Tuesday as investors booked profits after the metal soared to a seven-year high in the previous session on the backdrop of a rise in coronavirus cases outside China.

Spot gold slipped 0.8% to $1,646.80 per ounce by 7:09 a.m. EST, having shed more than 1% at one point earlier in the session. U.S. gold futures fell 1.6% to $1,649.50.

On Monday, the metal surged as much as 2.8% to $1,688.66, its highest since January 2013.

“Since then the market has basically run into some profit-taking despite the biggest sell-off in the global stocks for quite a while and it just highlights the market may have run ahead of itself,” said Saxo Bank analyst Ole Hansen.

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Global stock markets stabilized on Tuesday after European shares had their worst one-day loss since June 2016 in the last session.

Countries around the world are stepping up efforts to stop a pandemic of the virus that emerged in China and is now spreading in Europe and the Middle East.

Mainland China in total had 508 new confirmed cases, up from 409 on Feb. 23, bringing the total number of confirmed cases so far to 77,658.

Gold in euros and gold priced in sterling slid from all-time peaks hit on Monday.

“With the virus spreading to other regions, and if China experiences a relapse and the drags on growth extend into April, (spot) gold could move to $1,650-1,700 per ounce,” UBS analysts wrote in a note.

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 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,” Saxo Bank’s Hansen said.

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.”

On the technical front, gold may retest a support at $1,639 per ounce, according to Reuters analyst Wang Tao.

Among other precious metals, palladium gained 1.3% to $2,661.99 per ounce.

Silver fell 1.4% to $18.37 an ounce, having touched its highest since early September on Monday, while platinum inched 0.1% lower to $962.60.


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