Gold Prices Marked Their Highest Since April 2013

The current gold prices marked their highest in more than six years as the spread of the coronavirus globally prompted demand for haven assets.

Gold for February delivery GCG20, +0.06% on Comex increased $5.50, or nearly 0.4%, to settle at $1,577.80 an ounce, after hitting an intraday high at $1,588.40. It settled with a weekly gain of 0.7% on Friday. The precious metal reached its highest since April 9, 2013.

In the latest attempt at regulation, the Chinese government extended the week-long holiday and banned all outgoing tours. This is to avoid having travelers contribute to its spread. The country is under pressure as the virus shows little sign of slowing down, now spread to other countries as well. Death toll from the virus raised to 106, and cases of new infections have almost doubled in a day.

Gnanasekar Thiagarajan, director at Commtrendz Risk Management Services, said that news flow on the virus is pushing haven buying. The fear is further adding to the risk-averse sentiment. Gold is targeting $1,610 in the near term.

A Good Start of the Year Doesn’t Guarantee Higher Prices

The markets’ focus is on the news around the dangerous coronavirus. It will undoubtedly have an economic impact. A key question is a time it will take for the virus to be restrained, states Bank of New Zealand in a report.

Georgette Boele, Dutch bank’s senior FX & precious metals strategist, announces that price correction is possible in the coming weeks and months. The first month of the year is usually good for gold prices. But it doesn’t give hope that they will continue to climb higher. The strategist assumes that some of the key drivers will be the US dollar, negative-yielding debt, low-interest-rate environment, and increased physical demand. The US dollar is one of the primary drivers of the gold price. Additionally, Boele expects a lower US dollar over time.

On the contrary, Carlo Alberto De Casa, Chief Analyst at ActivTrades, claims that despite the strength of the dollar, the gold price is taking advantage of this uncertain situation. The short-term correction we’ve seen the last few weeks is over. Thus, there’s a chance the price reaches a new 7-year-high in the next few weeks, states the analyst.

This year the Federal Reserve Board of the USA is preparing for its first rate-setting meeting, where it’s expected to sustain an easy monetary policy. And the World Gold Council will submit its assessment of global demand trends.