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Gold Surges to Seven-Year High as Coronavirus Fears Resurface

February 21, 2020 at 17:41 by Andrew Moran

Gold futures are trading at their best levels in seven years as the yellow metal is rallying to finish the trading week. With equities posting steep losses, investors are diving into the safe-haven asset and helping gold eye the crucial $1,650 mark. A plummeting US dollar is also lifting the precious metals.

April gold futures surged $23.30, or 1.44%, to $1,643.80 per ounce at 16:12 GMT on Friday on the Comex division of the New York Mercantile Exchange. Gold is poised for a weekly jump of more than 3.5%, advancing about 8% year-to-date.

Silver, the sister commodity to gold, is also rallying to close out the trading week. March silver futures rose $0.17, or 0.92%, to $18.49 per ounce. The white metal will post a weekly gain of 4.4%, bringing its 2020 increase to 3.3%.

Financial markets have renewed their concerns over the coronavirus, fearing that the pandemic will impact global economic growth. The death toll has risen to 2,250 and the number of confirmed cases is nearing 77,000. While the Chinse economy is slowly getting back to work, approximately 1,000 businesses surveyed remain closed and one-third are operating remotely. Health authorities continue to remain proactive, and the government is employing domestic policies that emphasize “stable employment.”

Over the last two weeks, the federal government and the People’s Bank of China (PBoC) have imposed a series of fiscal and monetary stimulus measures to limit the economic fallout from Covid-19. Despite this, US businesses with operations in the world’s second-largest economy are warning that their earnings per share (EPS) and revenues will take a beating in their quarterly reports.

With so much uncertainty in global markets, traders are diving into safe-haven assets, including the US dollar. But the greenback seemed to have taken a breather on Friday as it slumped 0.58% to 99.29, from an opening of 99.86. A stronger buck is bad for dollar-denominated commodities because it makes it more expensive for foreign investors to purchase.

The latest US data could not instill confidence in the equities market as business activity in the manufacturing and service sectors was flat this month. Analysts might be anticipating the Federal Reserve to cut interest rates on the latest developments, which would be a boon for bullion, but a handful of central bankers have already confirmed that traders should not pencil in a rate cut.

Gold miner stocks have been on a tear in recent sessions, climbing to their best levels in more than five years. Mining companies may be taking advantage of higher prices, and investors are betting on greater output for the rest of the year.

In other metal markets, April copper futures added $0.02, or 0.75%, to $2.6085 per pound. March platinum futures shed $3.00, or 0.31%, to $976.00 an ounce. March palladium futures soared $28.50, or 1.11%, to $2,602.39 an ounce.

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