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Gold Eyes $1,700 As Coronavirus Triggers Safe-Haven Demand

February 24, 2020 at 15:31 by Andrew Moran

Gold futures are surging to open the trading week as the yellow metal eyes $1,700. Investors are seeking shelter from the beating that global financial markets are taking due to renewed fears over the coronavirus. With the virus outbreak extending beyond the borders of China to 25 countries, traders are worried that the global economic recovery will take a hit for the rest of 2020. Could gold top $2,000 this year?

April gold futures soared $28.90, or 1.75%, to $1,677.70 per ounce at 14:09 GMT on Monday on the Comex division of the New York Mercantile Exchange. Gold prices will settle at their best levels since January 2013. It is likely that the precious metal will top $1,700 soon, which would be the highest it has been in eight years. Year-to-date, gold has risen 10%.

Silver, the sister commodity to gold, is also rallying to kick off the trading week. March silver futures tacked on $0.14, or 0.76%, to $18.67 an ounce. The white metal has been posting significant gains in recent sessions, advancing nearly 6% in the last week. So far this year, silver is up 4.3%.

Global financial markets are deep in the red on Monday as North American, European, and Asian stocks have plummeted. The Dow Jones crashed 800 points, the FTSE shed 3.5%, and the Hang Seng Index plunged 488 points. There has been a major selloff in chipmaker, technology, airline, and telecommunications stocks as investors fear an impact to global supply chains and the outbreak intensifying in international markets.

The death toll has topped 2,500 and the number of confirmed cases is nearing 80,000. Because international commerce has been disrupted and more nations report infections, the International Monetary Fund (IMF) warned that the global economic recovery will pause this year, mainly due to the uncertainty. The World Health Organization (WHO), meanwhile, says it is worried about the growing number of cases without a direct link to China.

As a result, there is a mix of short-selling and FOMO driving gold’s ascent on Monday. But the precious metals’ gains have been capped by a rising US dollar. The US Dollar Index rose 0.14% to 99.44, from an opening of 99.34. A strong buck is bad for dollar-denominated commodities because it makes it more expensive for foreign investors to purchase.

Although the Federal Reserve has discouraged markets from pricing in a cut to interest rates, 56% anticipate easing at the Federal Open Market Committee (FOMC) meeting in April, according to the CME Group FedWatch tool. A low-rate environment is bullish for metal commodities since it reduced demand for low-yielding investments.

The benchmark 10-year Treasury note slumped to 1.37%, the lowest it has been in close to four years.

In other metal markets, April copper futures slipped $0.03, or 1.23%, to $2.5825 per pound. March platinum futures shed $11.80, or 1.22%, to $964.10 an ounce. March palladium futures plummeted $80.40, or 3.09%, to $2,525.00 per ounce.

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