Gold steadies as virus concerns stall stock markets

By in Commodity News on February 8, 2020 7:09 pm
Gold inched up on Friday as a rally in global stock markets briefly stalled due to worries over the economic impact from the coronavirus, while investors awaited US jobs data for indications on the country’s economic health.

Spot gold was up 0.1 per cent at $ 1,568.21 per ounce as of 1050 GMT, but was down about 1.3 per cent so far this week, its biggest weekly loss since early November.

US gold futures were also up 0.1 per cent at $ 1,572.10 per ounce.

“Gold is treading water at the moment. On one side insecurities come back with jitters in European and Asian stock markets, which is supporting gold prices, but on the other side, we have a stronger dollar,” Commerzbank analyst Eugen Weinberg said.

Worries over the virus, which has claimed almost 640 lives so far and has spread to many countries globally, pressured world markets which were on course for the best week for stocks since June.

Stemming bullion’s upside, the dollar rose to its highest since mid-October against key rivals.

The safe-haven metal was on track for its biggest weekly decline in three months on back of a series of solid US economic data, including a drop in unemployment benefits.

Market participants are now awaiting the US non-farm payrolls report due later in the session, for cues regarding the strength of the labour market and the US economy.

The payrolls data is “one of the most important indicators for the US central bank” and investors want to know what the report would mean for the Federal Reserve moving forward, said Giovanni Staunovo, a commodities analyst from UBS.

The Fed kept benchmark interest rates unchanged in its January policy meeting, citing moderate growth in the economy and a strong jobs market.

Lower interest rates reduce the opportunity cost of holding non-yielding bullion.

If the data comes in as strong as expected, the market might not react that much, but should the data disappoint then the US dollar could snap back and fall, which is supportive for bullion, Commerzbank’s Weinberg said.

A weaker dollar makes greenback-denominated assets, such as gold, cheaper for investors holding other currencies.

Elsewhere, palladium fell 0.2 per cent to $ 2,341.13 an ounce, but was on track to post its first weekly gain in three.

Silver slipped 0.2 per cent to $ 17.78 per ounce, set for its worst week in two months, while platinum rose 0.6 per cent to $ 967.03 per ounce.