Gold prices dipped on Thursday after China unveiled measures to soften the economic impact of the coronavirus outbreak, but the metal held close to a nearly seven-year peak scaled in the previous session as concerns over the epidemic prevailed.
Spot gold was down 0.2pc at $1,608.96 per ounce, as of 0550 GMT US gold futures were flat at $1,611.90.
“It seems to be a bit more corrective mostly because … it’s not just in gold that we are seeing a bit of a walk-back in risk-off dynamics, but across a variety of assets,” said DailyFx currency strategist Ilya Spivak.
China’s central Hubei province had 349 new confirmed cases of coronavirus on Wednesday, the province’s health commission said, down from 1,693 a day earlier and the lowest since Jan. 25, although it was accompanied by a change in methodology.
Beijing cut its benchmark lending rate to support an economy hit by the epidemic, keeping Chinese stocks supported.
Also limiting any uptick in gold prices, the dollar was sucking up funds across Asia after a steep and sudden slide in the Japanese yen called into question its safe-haven status.
Analysts, however, said concerns over the outbreak capped losses in bullion, keeping prices close to an intraday high of $1,612.62 an ounce hit on Wednesday, which was the highest since March 25, 2013.
There’s still a lot of haven-based buying of gold, said Jeffrey Halley, senior market analyst at OANDA.
“I suspect this means not everybody is buying into the hype that China is on the verge of controlling this virus.”
Actions by the Federal Reserve would also continue to determine gold’s trajectory, analysts said.
US Fed policymakers were cautiously optimistic about their ability to hold interest rates steady this year, minutes of the central bank’s last policy meeting showed on Wednesday, even as they acknowledged new risks caused by the epidemic.
Lower interest rate reduces the opportunity cost of holding non-yielding bullion.
“Short-term, gold prices should stay supported and test new highs as growth risks are reassessed, but absolute returns may be limited if coronavirus-related disruptions are limited to 1Q,” UBS analyst said in a note dated Feb. 19.
Elsewhere, deficit-hit palladium advanced 0.5pc to $2,727.91 an ounce, having touched a record high of $2,841.54 in the previous session.
Silver shed 0.1pc to $18.38, but hovered near its highest in more than a month hit on Wednesday, while platinum fell 0.9pc to $996.
