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Gold retreats from 7-year high, but virus fears limit losses
[BENGALURU] Gold prices fell on Tuesday as investors booked profits from a jump to a seven-year high in the previous session and as equities regained some footing, but a spike in coronavirus cases outside of China capped bullion's losses.
Spot gold was down 0.7 per cent at US$1,648.36 per ounce as at 0605 GMT. On Monday, the metal rose as much as 2.8 per cent to US$1,688.66, its highest since January 2013.
US gold futures fell 1.6 per cent to US$1,650.60.
"S&P futures jumped and regional stock markets opened higher, so we saw a temporary bout of selling pressure come through on gold," said Jeffrey Halley, senior market analyst at Oanda.
"Now, we're seeing bargain hunters come in to buy gold. There are increasing concerns that the virus is becoming a global issue now rather than being contained in China."
Asian share markets found some stability after a wave of early selling petered out and Wall Street futures managed a solid bounce.
However, the coronavirus death toll climbed to seven in Italy on Monday, while several Middle East countries were dealing with their first infections.
If central banks react to the global spread by cutting interest rates or through further monetary easing, gold will benefit, ING analyst Warren Patterson said.
While a rising US dollar, which has also seen strong interest as a safe haven amid the outbreak, could temper gold's rally, it is unlikely to "hold it back too much", Mr Patterson added.
The rapid spread of the virus beyond China has heightened fears over its impact on the global economy, driving some bets that the U.S. Federal Reserve will be pressed to cut rates to cushion the hit.
Lower interest rates reduce the opportunity cost of holding non-yielding bullion.
US Treasury Secretary Steven Mnuchin, meanwhile, told Reuters he does not expect the outbreak to have a material impact on the Phase One trade deal with China, although that could change as more data becomes available.
However, the Trump administration is considering asking lawmakers for emergency funding to ramp up its response to the epidemic.
On the technical front, gold may retest a support at US$1,639 per ounce, according to Reuters analyst Wang Tao.
Among other precious metals, palladium gained 0.3 per cent to US$2,637.25 per ounce.
Silver slipped 0.7 per cent to US$18.50 an ounce, having touched its highest since early September on Monday, while platinum was steady at US$963.52.