· Gold prices fluctuated more than one per cent on Friday, sliding from a seven-year high as investors sold the precious metal to cover margin calls as the rapid spread of the coronavirus hammered equity markets.
Spot gold fell 0.5 per cent to $US1,662.75 per ounce on Friday. US gold futures slipped 0.3 per cent to $US1,663.60.
Gold jumped 1.2 per cent to its highest since January 2013 at $1,689.65 earlier in the session, but then shed all those gains to drop as much as 1.4 per cent.
· "We are seeing a lot of volatility in the equity markets, fairly large losses and uncertainty bringing the S&P below 3,000. We are most likely seeing liquidation of gold in order to cover margin calls," said Bart Melek, head of commodity strategies at TD Securities.
· "This is very reminiscent of what happened in the corrections during the financial crisis." US stocks tanked and the Dow Jones Industrials shed nearly two per cent, while government bonds rallied as traders worried about a prolonged economic slowdown.
· Oil prices also collapsed more than eight per cent to their lowest levels since mid-2017.
· "This dip (in gold) should be bought up fairly quickly as the day goes on. As long as this virus is in the headlines out there, expect gold to continue higher," said Bob Haberkorn, senior market strategist at RJO Futures.
· Despite the losses, safe-haven gold is still on course for its biggest weekly gain since February 2016. Nearly 60 new coronavirus cases were confirmed in the United States on Thursday.
· Globally, virus cases surpassed 100,000 and over 3,300 deaths have been reported. The International Monetary Fund on Wednesday said the outbreak would hold 2020 global output gains to the slowest pace since the 2008-2009 financial crisis.
· The epidemic poses "evolving risks" to the US economy and central bank officials are monitoring developments closely, New York Federal Reserve President John Williams said on Thursday.
· The Federal Reserve made an emergency 50-basis-point interest rate cut on Tuesday, its first inter-meeting cut since 2008. Lower interest rates reduce the opportunity cost of holding non-yielding bullion. US nonfarm payrolls data showed a robust increase in hiring in February, but the report may not reflect the full impact from the outbreak.
· Breaking: Gold price breaks above $1,700 amid growing coronavirus concerns
The price of gold has been extending its gains at the beginning of the new week in Asia. XAU/USD has reached a high of $1,700.32 at the time of writing.
Growing concerns about coronavirus, especially in Italy, have triggered safe-haven flows toward the precious metal. The eurozone's third-largest country announced severe travel limits in several northern provinces including where 16 million people live, including Milan. The death toll from the virus has climbed from 233 to 366.
Investors fear damage to the US economy, with PIMCO foreseeing an outright recession. The crash in oil prices is not helpful either.
Above $1,700, the next target is $1,720. The all-time high is above $1,900 and is from 2011. Support awaits at the previous seven-year peak of $1,690.
Reference: Business News, FXStreet
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