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Gold Inches Toward $1,600 As Coronavirus Spurs Safe-Haven Demand

January 27, 2020 at 17:22 by Andrew Moran

Gold futures are inching toward their best levels in more than six years as the Wuhan coronavirus is triggering safe-haven demand in global financial markets. Right now, fear is driving the market and triggering a massive sell-off worldwide. With tremendous uncertainty surrounding the future of the outbreak and concerns over a potential mutation, investors are scooping up gold.

February gold futures rose $8.70, or 0.55%, to $1,580.60 per ounce at 15:57 GMT on Monday on the Comex division of the New York Mercantile Exchange. Gold is heading to its best level in more than six years. Last week, the yellow metal recorded a weekly gain of more than 1%, lifting its year-to-date gain to nearly 4%.

Silver, the sister commodity to gold, is picking up some modest gains to kick off the trading week. March silver futures added $0.075, or 0.4%, to $18.18 an ounce. The white metal posted a tepid gain of 0.6% last week, bringing its YTD jump to 1.6%.

Precious metals have been appealing under current market conditions as investors are terrified of the economic fallout of the coronavirus outbreak. Most of the leading stock indexes worldwide are deep in the red, including the Dow Jones Industrial Average which has shed about 500 points. Analysts say that traders are playing the long game by driving gold demand and biding their time for key stocks to come down in price. Although some strategists say that the panic is unjustified, markets are signaling that investors waiting for the flu to spread.

The Chinese government has confirmed that at least 81 people have died, and there are about 3,000 confirmed cases, though the number of suspected cases is a lot higher. The coronavirus has reached other countries, including five confirmed cases in the US, two confirmed cases in Canada, and the United Kingdom has 52 patients being tested for it.

Meanwhile, Beijing has extended the Lunar New Year holiday to February 2 as health authorities expand its prevention and implement its control protocols.

The Cboe Volatility Index (VIX), a go-to measurement of fear on Wall Street, surged 18.2% to 17.21.

Metal markets will keep an eye on the Federal Reserve’s policy meeting this week. The market anticipates that the Federal Open Market Committee (FOMC) will leave interest rates unchanged. However, there is speculation that the Fed could cut rates in the coming months if the virus affects the US economy.

In other metal commodities, March copper futures cratered $0.09, or 3.43%, to $2.59 per pound. March platinum futures plummeted $17.70, or 1.75%, to $992.90 an ounce. March palladium futures crashed $124.60, or 5.38%, to $2,191.70 per ounce.

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