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Gold Rallies on Surge of Confirmed Coronavirus Cases in China

February 13, 2020 at 10:48 by Vladimir Vyun

Gold rallied today on risk aversion caused by the news about the Wuhan coronavirus in China. Other precious metals joined the rally, with the exception of palladium.

Markets were largely in a risk-off mode after the report about a sudden surge of deaths and confirmed cases of infection in China’s Hubei province. The death toll climbed by 242 to 1,310 on February 12. The number of confirmed cases jumped by 14,840 — that is compared with the increase of 2,015 registered in the whole of China on February 11. Chinese officials explained the sudden surge by a change to counting methods and broadening of the definition of the disease to include “clinically diagnosed” cases. It remains to be seen whether such an explanation will be able to calm down markets. For now, though, the report broke the trend of a stabilizing number of new cases and caused confusion.

Gold is traditionally used as a safe harbor for investors during times of uncertainty and fear. Thus, the troubling news about the virus outbreak was beneficial to the metal.

Not all the news was positive for bullion, though. Federal Reserve Chairman Jerome Powell dashed hopes for interest rate cuts in his testimony, signaling that he sees no reason for a cut in the immediate future. He said:

The FOMC believes that the current stance of monetary policy will support continued economic growth, a strong labor market, and inflation returning to the Committee’s symmetric 2 percent objective. As long as incoming information about the economy remains broadly consistent with this outlook, the current stance of monetary policy will likely remain appropriate.

Futures for delivery of gold in April gained by $6.7 (0.43%) to $1,578.3 per troy ounce as of 10:46 GMT on COMEX today. March contract for silver rallied $0.14 (0.82%) to $17.64 per ounce. Spot price for platinum rose by $2.56 (0.27%) to $965.71 per ounce, while palladium shed $7.12 (0.3%) to $2.392.69 per ounce.

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