Gold holds near 2-week high on uncertainty over virus impact

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Gold on Monday held near the two-week high scaled in the previous session on uncertainty over the impact of the coronavirus outbreak on the global economy.

Spot gold was little changed at $1,582.27 per ounce as of 0226 GMT, having touched its highest since Feb. 3 at $1,584.65 on Friday. U.S. gold futures eased by 0.1% to $1,585.40.

“Gold is holding firm at high prices as uncertainty around coronavirus remains high, while the economic impact is still unclear,” said Michael McCarthy, chief market strategist at CMC Markets.

The death toll from the outbreak in mainland China reached 1,770 by Sunday, up by 105 from the previous day, the country’s National Health Commission said on Monday.

The epidemic pushed Singapore to downgrade its 2020 economic growth forecast, while a Reuters poll showed Japanese manufacturers remained pessimistic in February.

Asian shares stepped back from three-week highs as investors weighed the near-term hit on global growth from the virus, while the dollar hovered close to a more-than four-month high against key rivals.

“The dollar normally works against the gold price, but the fact that gold did rise despite that goes to say that it (dollar) doesn’t have much impact on gold at the moment,” CMC’s McCarthy said, adding that the strong technical resistance of $1,590 is “limiting the enthusiasm in the market.”

Meanwhile, Cleveland Federal Reserve Bank President Loretta Mester on Friday said the epidemic could be a drag on the U.S. economy this quarter.

The U.S. central bank had flagged concerns regarding a potential impact on the U.S. economy due to the outbreak, while keeping benchmark interest rates unchanged in the previous meeting.

Lower interest rate reduces the opportunity cost of holding non-yielding bullion.

Easy monetary policy around the globe is one of the reasons keeping gold attractive in the longer term, analysts said.

Speculators increased their bullish positions on COMEX gold in the week to Feb. 11, the U.S. Commodity Futures Trading Commission (CFTC) said on Friday, indicating appetite for gold.

Holdings in the world’s largest gold-backed exchange-traded fund, SPDR Gold Trust, rose 0.2% to 923.99 tonnes on Friday from 922.23 tonnes on Thursday.

Elsewhere, palladium rose 0.5% to $2,443.61 an ounce, silver was up 0.6% at $17.84, while platinum gained 0.3% to $966.40. (Reporting by K. Sathya Narayanan in Bengaluru; editing by Uttaresh.V)