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Gold futures climbed Thursday as refreshed worries about a viral outbreak helped to refocus investor concerns on the economic implications of the disease, buttressing bullion prices.
“There is still a thick smog of uncertainty over the outbreak and impacts it will have on China and global economy,” said Lukman Otunuga, senior research analyst at FXTM. “Caution remains a major theme.”
Chinese health officials changed the method of diagnosing cases of the illness—COVID-19. As a result, there was a sevenfold increase in the number of new cases of COVID-19, the new coronavirus illness that was first identified in December in Wuhan, China, based on a new diagnostic protocol, according to China’s National Health Commission.
Gold for April delivery GCJ20, +0.53% on Comex rose $6.30, or 0.4%, to $1,577.90 an ounce. Prices posted a gain on Wednesday, their fifth rise in six sessions. March silver SIH20, +0.85%, meanwhile, added 15.8 cents, or nearly 0.9%, at $17.655 an ounce.
“With a plethora of global risk simmering on the back burner—supply chains and demand contraction notwithstanding, it’s too early to downgrade COVID-19 to a nasty case of the sniffles so gold remains a critical defense of the strategy,” wrote Stephen Innes, chief market strategist at AxiCorp, in a research note.
Precious metals prices are also benefiting from a slide in rates of government bonds, which have drawn bids due to the reignited fears of viral illness emanating from China and its potential to hurt global economic growth.
The 10-year Treasury note yield TMUBMUSD10Y, -0.40%, for example, was down 2.1 basis points to 1.609%. Lower yields can increase the appeal of commodities that don’t offer a coupon. The Dow Jones Industrial Average DJIA, -0.24% and the S&P 500 index SPX, -0.05% were also moving lower, providing additional support for haven assets.
The U.S. dollar, as measured by the ICE U.S. Dollar Index DXY, -0.01%, which has been stronger for the week, was edging lower and can offer a runway for assets priced in the buck—making them more attractive for those buying assets in other currencies.
Meanwhile, in economic data, January consumer prices rose by a modest 0.1%, but ticked 0.2% higher once the figures were stripped out for food and energy prices. U.S. initial jobless claims for the week ending in Feb. 8 edged up 2,000 to 205,000, underlining the strength of the labor market.
Right now, gold’s wider trading range is at $1,550 to $1,590, according to Chintan Karnani, chief market analyst at Insignia Consultants. “If gold manages to break and trade over $1,590, then $1,637 will be the target,” he told MarketWatch.
“No one can predict the actual economic impact of coronavirus,” he added. However, “the longer time coronavirus spreads, the greater are the chances of $1,700 next month and the deeper…the global economic slump” will be.
Other metals on Comex traded higher, with April platinum PLJ20, +0.80% up nearly 1% at $976.50 an ounce and March palladium PAH20, +0.84% up 0.9% at $2,344 an ounce.
March copper HGH20, +0.63% rose 0.7% to $2.619 a pound.
