Gold rises as virus woes persist, focus turns to Fed

Gold gained on Wednesday as worries over economic growth due to the fast-spreading coronavirus buoyed safe haven demand, with investors awaiting the U.S. Federal Reserve’s monetary policy decision.

Spot gold was up 0.3% at $1,570.67 per ounce by 11:52 a.m. EST (1652 GMT).

U.S. gold futures were steady at $1,570.20 per ounce.

“Investors are looking for hints on what the Fed will do with rates in 2020,” said Bob Haberkorn, senior market strategist at RJO Futures.

The U.S. central bank is set to share the statement of a two-day monetary policy meeting at 2 p.m. EST (1900 GMT).

While the Fed is not expected to change interest rates, investors will want to hear whether its chairman, Jerome Powell, retains his cautiously upbeat language.

Lower interest rates decrease the opportunity cost of holding non-yielding bullion and weigh on the dollar, making gold cheaper for investors holding other currencies.

“Other than the Fed factor, reasons for investors’ interest in gold are the coronavirus impact and how it will affect the Chinese economic data,” Haberkorn added.

The United States and Japan evacuated their nationals from a quarantined city, Wuhan, in China, while British Airways suspended flights as deaths from the outbreak rose to 132 and the first cases emerged in the Middle East.

Although better-than-expected corporate earnings helped drive a slight recovery in financial markets, fears over the economic fallout from the outbreak weighed on investor appetite for riskier assets.

On Tuesday, gold prices fell nearly 1% after positive U.S. economic data lifted equity markets along with the dollar.

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Further bolstering gold’s appeal, U.S. Treasury yields also fell on concerns surrounding the epidemic.

“The main driver for gold this year will be strategic inflows, as it will continue to be viewed as an attractive diversifier for investor portfolios in an environment where rates remain low,” UBS strategist Joni Teves said.

Elsewhere, palladium fell 0.4% to $2,280.42 per ounce, while platinum dipped 1.4% to $971.89.

Palladium will cost on average more than twice as much as platinum this year, but that premium will narrow in 2021, a Reuters poll showed.

Silver rose 0.2% to $17.47, having earlier dipped to its lowest since Dec. 23 at $17.35.



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