Gold tops US$1,600 as virus fuels growth fears

[SINGAPORE] Gold traded near the highest level since 2013 on concerns over the spread of the new coronavirus and how it's impacting global growth. Palladium topped US$2,700 an ounce as it continued its record-breaking rally.

Bullion steadied after surging 1.3 per cent Tuesday's as Apple Inc's warning that the virus and efforts to contain it would have its sales missing forecasts spurred a sell off in stocks. China's death toll from the disease topped 2,000, while the province at the centre of the outbreak reported fewer additional cases. The flight to safety has benefited haven assets, with the rally spilling over to the palladium market, where a multi-year deficit is expected to widen in 2020.

Gold is up 5.6 per cent this year as investors assess the impact of the disease on economic growth and appetite for risk amid speculation that the Federal Reserve will feel increased pressure to reduce interest rates. The US central bank has said the effects of the virus have presented a "new risk" to the outlook and traders will study minutes from the Fed's latest meeting, due later on Wednesday, for any hint of a dovish tone.

Spot gold was little changed at US$1,601.88 an ounce at 11.46am in Singapore. Prices had touched US$1,611.42 in early January, the highest since 2013, as geopolitical tensions flared. The unfolding health emergency has seen holdings in global exchange-traded funds backed by bullion expand to a record. Palladium climbed 3 per cent to US$2,709.10 an ounce, an all-time high.

"A deficit equivalent to about 20 per cent of the palladium market is expected to be sustained this year, helping explain the surge in prices," said Vivek Dhar, an analyst at Commonwealth Bank of Australia. Demand is being driven by environmental regulations, particularly in China, which has increased palladium use in vehicles and should offset any recent weakness in car sales, he said.

Among other main precious metals, silver rose 0.5 per cent and platinum advanced 1 per cent.

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