Gold has been creeping up on $1,600 an ounce as investors have been rushing to safe haven assets as the China’s coronavirus continues to spread.
Cases of the coronavirus worldwide have topped 8,200 as of Thursday morning, outpacing the total number of infections over the nine-month SARS outbreak of 2002 – 2003 in just under one month. And the Centers for Disease Control and Prevention confirmed that the U.S. now has its first person-to-person transmission of the virus.
The mayor of Wuhan, the region in China where the coronavirus originated, said that around 5 million people had left the city for the Lunar New Year before travel restrictions had be put in place in an effort to slow the spread of the virus, predicting another 1,000 cases would be confirmed.
“News flow on the virus is pushing safe haven buying,” said Gnanasekar Thiagarajan, director at Commtrendz Risk Management Services. “In this kind of an environment, stock markets could tank and that fear is further adding to the risk-averse sentiment. The outlook is bullish for gold.”
Spot gold has climbed to $1,583 Thursday as concerns over the virus have intensified as stocks have fallen as the death toll has risen.
Miller Tabak chief market strategist Matt Maley said that the shiny yellow metal could climb far higher if it can break the high of $1,611 it reached at the beginning of the year as tensions escalated between the U.S. and Iran.
“Even before [last] Friday’s ‘flight to safety’ move, gold was already acting quite well,” Maley said. “During its most recent decline it did not break below its key $1,550 support level in any significant way, despite the continued rally in the stock market during mid-January.”
“Now it’s bouncing again,” Maley added. “If it takes out its early January highs, it’s going to be very bullish for the yellow metal. … That level is $1,611, so any move above that—especially if it closes above that level—should signal that another powerful leg in the rally in gold is upon us.”