Gold Climbs to Highest Price in Seven Years, Reflecting Coronavirus Concerns

RIO DE JANEIRO, BRAZIL – The fears of the new coronavirus spreading outside China led to gold recording on Monday, February 24th, the highest mark in seven years, nearing the US$1,700 (R$6,800) per troy ounce mark (a measure used in some precious metals trading, equivalent to 31.1 grams).

Investors have sought the security of the precious metal, which was traded at US$1,691.70 on the futures market.

At the closing of the New York session, the gold contract for delivery in April was quoted at US$1676.60 per troy ounce, up 1.69 percent.

On the other hand, oil futures contracts closed down with the rise in the number of coronavirus cases in Italy and concerns over the epidemic in countries like South Korea and Iran, where new cases have emerged in recent days.

Investors also continue to monitor the lack of consensus among members of the Organization of Petroleum Exporting Countries and allies (OPEC+) on a deeper cut in cartel production.

WTI crude oil for delivery in April ended the day down 3.65 percent at US$51.43 a barrel on the New York Mercantile Exchange (Nymex), while Brent crude for the same month dropped 3.76 percent to US$56.30 a barrel on the Intercontinental Exchange (ICE) in London.

The rapid surge in cases in Italy has sparked fears that the country could be the center of a major outbreak in Europe. Seven people have already died in the country, and the number of infected exceeds 200. WHO has considered the increase of cases in the Italian, Iranian and South Korean territories to be “deeply disturbing”.

In a report sent to clients, ING analysts point out that the affected municipalities in Italy are close to economically relevant neighbors like Milan. “The main concern will be whether the virus can be contained without affecting industrial and service activities, at a time when the Italian economy is nearing another technical recession”.

The German Commerzbank said that “if more countries and continents are affected by the virus, it is likely to produce substantial restraining effects on the economic activity of the European bloc. A lower demand for oil would further increase the excess supply” existing in the market.

“There is a greater need for OPEC and its allied producers to reduce production further. However, the alliance between Saudi Arabia and Russia seems to be pending, apparently because Russia stubbornly refuses any further cuts in production,” recalls Carsten Fritsch, an analyst with the German bank.

Source: InfoMoney