Tuesday, September 29, 2020
Home Gold rate falls from 7-year high on profit-taking, coronavirus fears cap losses

Gold rate falls from 7-year high on profit-taking, coronavirus fears cap losses

US gold futures fell 1.5 per cent to $1,651 an ounce.

Gold prices fell 1 per cent on Tuesday as investors chose to pocket profits after the metal hit a seven-year high in the previous session, although growing fears over a spike in new coronavirus cases outside of China capped bullion’s losses.


Spot gold was down 0.7 per cent to $1,649.49 per ounce by 0132 GMT, having touched a session low of $1,642.89.

Bullion rose to a more than seven-year high of $1,688.66 in the previous session.

US gold futures fell 1.5 per cent to $1,651 an ounce.

“The 1 per cent fall was because of margin calls but definitely that has triggered an added wave of profit-taking,” said Stephen Innes, chief market strategist at AxiCorp.

“In this kind of an environment, when stock markets are crashing it is easy to cover margin call. (But) given the overwhelmingly risk-off market, we should see gold find some support,” he added.

Asian shares extended losses amid fears the virus was rapidly mutating into a pandemic that could cripple global supply chains and wreak far greater economic damage than first thought.

The death toll climbed to seven in Italy on Monday and authorities sealed off the worst-affected towns, closed schools and halted the carnival in Venice, where there were two cases, while several Middle East countries were dealing with their first infections.

Investors are pricing in an increased chance the European Central Bank will cut interest rates sooner rather than later, reflecting heightened fears that the virus will spread and hit the euro zone economy hard.

US Treasury Secretary Steven Mnuchin told Reuters he does not expect the outbreak to have a material impact on the Phase 1 US-China trade deal, although that could change as more data becomes available in coming weeks.

Financial markets on Monday ratcheted up bets the US Federal Reserve will be pressed to cut interest rates to cushion a feared hit to economic growth from the epidemic.

The US economy should continue to perform well this year and monetary policy is currently well positioned despite the risk posed by the virus, Cleveland Fed President Loretta Mester said on Monday.

The Trump administration is considering asking lawmakers for emergency funding to ramp up its response to the fast-spreading coronavirus, a White House spokesman said without providing details.

Goldman Sachs said commodity prices could fall sharply before Chinese stimulus to combat the coronavirus impact later this year helps the sector achieve its 12-month return forecast of about 10 per cent.

Palladium rose 0.6 per cent to $2,642.97 an ounce, while platinum gained 0.3 per cent to $966.53.

Silver eased about 0.3 per cent to $18.58 per ounce.


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