Gold gains as virus fears spook equities, boost stimulus expectations

Gold rose on Wednesday after a near 2% slide in the previous session, as the coronavirus epidemic dented risk appetite among investors and fuelled expectations for further stimulus measures by major central banks.

Spot gold was up 0.4% at $1,656.40 per ounce by 10:38 a.m. EDT (1438 GMT), while U.S. gold futures inched down 0.1% to $1,659. Prices fell on Tuesday as stock markets rose on expectations for global policy measures to combat the virus.

"Equities are back trading in the red, which is pushing gold higher," said Bob Haberkorn, senior market strategist at RJO Futures. "After yesterday's dive down, we got some flight to safety into the gold right now from coronavirus fears."


"Gold should trade significantly higher based on what is going to happen in the next couple of weeks combating this coronavirus by the central banks."

U.S. stocks dived at the open, largely erasing the previous session's gains, as traders were skeptical about President Donald Trump's stimulus plan to cushion the impact from the coronavirus outbreak.

Globally, there are over 119,000 confirmed coronavirus cases.

The White House and Congress meanwhile negotiated stimulus measures on Tuesday, although there was no immediate sign of a deal.

Further supporting bullion, U.S. 10-year Treasury yields resumed their slide back towards Monday's record low, while the dollar slipped 0.4%.

The U.S. Federal Reserve slashed its benchmark rates in an emergency move last week, and is also expected to cut rates further when it meets later this month.

Gold tends to appreciate on expectations of lower interest rates, which reduce the opportunity cost of holding non-yielding bullion.

Earlier in the day, the Bank of England made a emergency rate cut and launched a package of other measures to combat a coronavirus-driven economic slowdown.

The European Central Bank is also expected to unveil new stimulus measures on Thursday.

Meanwhile, holdings in the world's largest gold-backed exchange-traded fund, SPDR Gold Trust , held near their highest in more than three years.

"ETFs are reflecting investment," said Soni Kumari, a commodity strategist at ANZ, adding that the lower interest rate environment and safe-haven demand were boosting inflows.

Elsewhere, palladium fell 2.7% to $2,354.26 per ounce.

"It was quite surprising that palladium was able to withstand massive headwinds from coronavirus for such a long time, so now it feels the pain of it," Commerzbank analyst Carsten Fritsch said, adding the autocatalyst metal will be weighed down by declining car sales.

Platinum was up 0.4% at $872.16, while silver rose 0.2% to $16.89 per ounce.