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Gold Retreats From Six-Year High, Still Poised for Monthly Gain Amid Coronavirus

January 31, 2020 at 17:40 by Andrew Moran

Gold futures are slightly retreating from their highest levels in more than six years to finish off the trading week. But while the yellow metal is trading slightly lower on Friday, it is still on track for both a strong weekly finish and a second straight monthly gain. Will gold continue to ease back or will safe-haven demand drive up the precious metal’s value?

April gold futures tumbled $2.30, or 0.15%, to $1,586.90 per ounce at 16:21 GMT on Friday on the Comex division of the New York Mercantile Exchange. Even with a lower settlement, gold will close the week at its highest level since March 2013. Gold prices are poised for a weekly jump of more than 1% and a monthly boost of 4.4%.

Silver, the sister commodity to gold, is edging up on Friday. March silver futures picked up $0.02, or 0.12%, to $18.01 per ounce. The white metal will post a weekly loss of 0.6%, but it is getting ready to report a monthly rise of 0.6%.

Gold rallied this week on concerns over the Wuhan coronavirus that has killed more than 200 and triggered nearly 10,000 confirmed cases in China and several other countries, including the US, Canada, Great Britain, Australia, Sweden, and Russia. The World Health Organization (WHO) finally declared it an international public health emergency, but it did laud the Chinese government for its measures to contain the outbreak.

The very strong measures the country has taken include daily contact with WHO and comprehensive multi-sectoral approaches to prevent further spread. It has also taken public health measures in other cities and provinces; is conducting studies on the severity and transmissibility of the virus, and sharing data and biological material. The country has also agreed to work with other countries who need their support. The measures China has taken are good not only for that country but also for the rest of the world.

Meanwhile, international airlines are suspending travel to and from China, the US government has raised its risk level from three to four (“do not travel to China”), and Russia closed its border. The consensus is that a vaccine will not be developed for at least 12 months since it would require development, testing, government approval, mass production, and shipment.

Despite two days of rebounds, global financial markets are reacting unfavorably to the virus. On Friday, the Dow Jones shed another 400 points, the Nasdaq fell 105 points, the Hang Seng dropped 135 points, the Shanghai Composite Index declined 85 points, and the Dax plunged 175 points. Surprisingly, the Nikkei added 227 points.

If the virus worsens and leads to a further slowdown in the global economy, central banks worldwide may cut interest rates. Experts are already sounding the alarm that first-quarter growth will not be pretty in the US economy. The Federal Reserve did hold off on interest rates at its January Federal Open Market Committee (FOMC) meeting, but there is a possibility the central bank could reduce rates in the spring if the economy calls for additional accommodating.

In other metal markets, March copper futures were unchanged at $2.52 per pound. March platinum futures fell $19.40, or 1.98%, to $961.10 per ounce. March palladium futures added $11.40, or 0.51%, to $2,227.10 an ounce.

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