Gold Creeps Toward $1,580 as Hedge to China’s Coronavirus

© Reuters.

By Barani Krishnan

Investing.com – There’s nothing like a global contagion to get gold buyers to pile back into the safe haven. The yellow metal hit two-week highs on Friday, creeping toward the $1,580-per-ounce level targeted by gold bugs on worldwide fears over the economic fallout to the China-originated coronavirus.

Gold futures for February delivery on New York’s COMEX settled up $6.50, or 0.4%, at $1,565.90 per ounce. It earlier reached $1,575.25, a peak since Jan. 8, as gold bugs appeared to shoot for a test of the $1,580 resistance.

Spot gold, which tracks live trades in bullion, was up $8.66, or 0.6%, at $1,571.69 per ounce, after a two-week high at $1,575.83.

Gold had initially been slow to react to potential economic fallout from coronavirus, but caught up over the past two days.

“In retrospect, it seemed like the virus situation was prodding bulls back into long positions yesterday afternoon,” The Hightower Report said in its precious metals report, adding that if the situation continued, gold bugs could expect an “upside extension from classic short covering (stop loss) buying”.

Likened to the Chinese-originated SARS health epidemic that caused major market disruptions in 2003, the coronavirus has killed 26 people so far, also in China. It has prompted the Chinese authorities to introduce travel restrictions across 10 cities, affecting up to 40 million people according to some reports, in the middle of the country’s most important holiday season, the Lunar New Year. Even Shanghai's Disneyland, one of the country’s most popular tourist destinations, has been shut.

Fears of a global contagion from the coronavirus has pummeled stock markets worldwide, with Wall Street’s S&P500 Index down almost 1% on Friday, heading for its biggest drop since October, as investors dumped risk everywhere and piled into the safety of U.S. Treasuries and other protection-assuring assets.

The United States, meanwhile, reported its second coronavirus case on Friday, saying a woman from Illinois was found infected after traveling back from Wuhan. Earlier this week, a man from Washington state became the first U.S. person to contract the virus.

Gold’s rise was also remarkable as it came on the back of a rally in the dollar, which hit three-week highs against a basket of six major currencies.