Gold reaches 7-year high on corona virus spike
Dealers remained cautious on whether the gains can be sustained, however, as outflows from the top physical gold exchange-traded fund continued to indicate bearish sentiment.
Bullion’s safe-haven appeal increased after news that patient numbers could explode if corona virus infection spreads rapidly, overburdening the healthcare system and damaging the economy.
The outbreak, which has infected nearly 77,000 people and killed more than 2,400 in China, is one of the most serious public health crises to confront leaders in decades.
“The further escalation of the situation has prompted gold purchases, especially on the futures market,” said Eugen Weinberg, head of commodity research at Commerzbank.
Global economic uncertainty after data showed a contraction in manufacturing that renewed concerns about a slowing economy and also supported gold, and the market largely ignored a report showing upbeat Chinese service-sector activities.
Analysts said the gold price – which has risen by more than 10 percent since the start of the year – could soon breach the $1,700 barrier. On Monday, prices surged more than 2 percent at one point, before retreating.
“Gold has finally established some serious momentum,” said Jeffrey Halley, senior market analyst at online trading platform Oanda.
Trading volume was in line with its 30-day average, preliminary Reuters data showed.
Weakness in investment has pressured gold in recent weeks.