Gold Prices Go Up As Coronavirus-Led Growth Fears Spur Safety Buying

Gold prices edged higher on Monday as investors sought safe havens, with fears about the economic damage from the coronavirus intensifying after governments extended lockdowns to curtail its spread. Spot gold was up 0.3 per cent at $1,621.60 per ounce by 3:10 PM, while US gold futures gained 0.3 per cent to $1,629.30.

"Volatility due to covid-19 is back in the markets. Gold prices profited a bit from safe-haven buying after stock markets dropped in Europe," said Quantitative Commodity Research analyst Peter Fertig.

"In the near term, gold price should be supported by safe-haven buying, but if stock markets drop deeper, selling of gold to meet margin calls could re-emerge."

Investors' appetite for riskier assets remained weak as fears mounted that the global coronavirus shutdowns could last for months, sending European shares lower for a second straight session and oil prices to their weakest in 17 years.

The pandemic has already driven the global economy into recession and countries must respond with "very massive" spending to avoid a cascade of bankruptcies and emerging market debt defaults, the head of the International Monetary Fund warned on Friday.

Central banks around the world have rolled out a wave of fiscal and monetary measures to stem the economic hit from the virus, with China, Singapore and New Zealand the latest to add stimulus.

More than 720,000 people have been infected by the novel coronavirus across the world and 33,969 have died, according to a Reuters tally.

Last week, the US House of Representatives approved a $2.2 trillion aid package — the largest in history — to help cope with the virus-inflicted economic downturn.

Lower interest rates and looser economic policy tend to benefit gold, as they cut the opportunity cost of holding non-yielding assets.

However, safe-haven gains for the US dollar capped gold's gains, as the dollar index rose 0.4 per cent.

"The huge amount of liquidity that the US Federal Reserve is going to send into the markets has been unable to generate further gold rallies, but the scenario could quickly change," ActivTrades chief analyst Carlo Alberto De Casa said in a note.

Elsewhere, palladium fell 1.8 per cent to $2,229.23 per ounce, platinum dropped 2.3 per cent to $724.29, and silver slipped 2.8 per cent to $14.07.

"Negative impact from covid-19 on the industrial sector is weighing on platinum and palladium prices. Longer lock-downs mean less demand for PGMs from car producers," said Quantitative Commodity Research's Fertig said.

Platinum producer Sibanye-Stillwater said it would declare force majeure on supply contracts for platinum group metals (PGMs) after it temporarily closed its South African mines to comply with a three-week national lockdown.

Impala Platinum has also declared force majeure, a source with direct knowledge of the matter said.