By Ritu,
Gold prices edged lower on Wednesday as new coronavirus cases fell and risk appetite improved, although uncertainty over the economic impact of the outbreak still underpinned bullion.
Spot gold XAU= edged 0.2% lower to $1,564.15 per ounce by 0818 GMT. U.S. gold futures were down 0.2% at $1,567.50.
While the death toll exceeded 1,100, China’s foremost medical adviser on the epidemic said the infection may be over by April, with the number of new cases already declining in some places.
“Equity market is doing good, U.S. dollar is above 98.5 and there is some rebound in base metals and energy markets that is showing some increasing risk appetite in investors,” said Vandana Bharti, assistant vice-president of commodity research at SMC Comtrade.
The U.S. dollar stayed close to four-month highs after soaking up safe-haven flows as worries about the coronavirus coincided with recent data showing the U.S. economy’s strength.
Innes said the measures taken by Chinese authorities to avoid large-scale layoffs were “keeping a lid on gold prices as it would be positive for growth and bullish for equity markets”.
However, he said the underlying support for gold remains due to factors including the knock-on effects of the virus, the impact of existing tariffs following the U.S.-China Phase 1 trade deal.
Chinese purchase of U.S. farm products this year under the Phase 1 trade deal could drop, White House national security adviser Robert O’Brien said.
Meanwhile, Federal Reserve Chair Jerome Powell told Congress on Tuesday the U.S. economy is in a good place, but cited the potential threat from the epidemic and concerns about the economy’s long-term health.
Gold, which is often used as an insurance against economic risks, tends to appreciate on expectations of lower interest rates, which reduce the opportunity cost of holding non-yielding bullion.