Gold Prices Surge as Virus Fears Lift Haven Demand
By Geoffrey Smith
- Gold prices rose again on Monday, bringing the three-year high that they hit earlier in the month back into focus as the spread of the novel coronavirus in China triggered a surge in risk-aversion and demand for haven assets.
By 11:20 AM ET (1620 GMT), gold futures for delivery on the COMEX exchange were up 0.7%, at $1,582.35 a troy ounce, down only slightly from an earlier high of $1,588.10 an ounce.
Spot gold was up 0.8% at $1,583.36.
“Interest has clearly jumped over the weekend as the situation has worsened somewhat,” said OANDA strategist Craig Erlam, who still remained skeptical of gold’s ability to hold at these rarefied levels.
“The yellow metal really struggled to maintain gains earlier this year above $1,600 as tensions between the U.S. and Iran got out of hand. I expect we’ll see plenty of resistance around these levels again, should we approach them,” Erlam said.
The increase in risk aversion expressed itself in a second-straight week of net inflows into gold-backed exchange-traded funds last week, according to data compiled by the World Gold Council. Even so, they have still had net outflows of 0.1% of assets under management since the start of the year, a reflection of how quickly U.S. investors in particular had moved back into risk assets at the start of the month.
Measures taken by China to contain the virus look increasingly likely to have an impact on economic output, something that may reverberate through the world more than similar measures to stop the SARS epidemic in 2003, when the country had a much smaller role in the global economy. The government at the weekend extended the week-long new year holiday by three days, while individual cities such as Suzhou, a coastal hub for the tech industry, also said they would delay reopening its factories.
However, this week’s central bank meetings are unlikely to reflect any clear deterioration in the global outlook. The Federal Reserve’s meeting, which ends on Wednesday, is universally expected to result in no change to interest rates, while the live meeting in London on Thursday is a closer call. U.K. ETF investors have been among the biggest buyers of gold this year as Bank of England officials have talked up the need for a rate cut. However, solid labor market data and a better-than-expected composite purchasing managers index for January have ensured that nothing is guaranteed when the Monetary Policy Committee meets on Thursday.
Elsewhere, silver futures hit a two-week high of $18.31 before retracing slightly to be up 0.5% on the day at $18.20 an ounce.
Platinum futures fell 1.8% to $992.65 an ounce, while copper futures gapped sharply lower, falling 3.1% to a three-month low of $2.60 a pound in a move that raised a big red flag about the outlook for demand from the world’s biggest consumer.