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Budget 2021

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Gold eases from 7-year high, but virus fears limit losses

Spot gold was down 0.2% to $1,657.40 per ounce by 0333 GMT, after declining 1% earlier in the session. On Monday, the metal rose as much as 2.8% to its highest since January 2013 at $1,688.66.

February 25, 2020 / 10:16 AM IST

Gold prices eased on Tuesday as investors booked profits from a jump to a seven-year high in the previous session and as equities regained some footing, but a spike in coronavirus cases outside of China capped bullion's losses.

Spot gold was down 0.2% to $1,657.40 per ounce by 0333 GMT, after declining 1% earlier in the session. On Monday, the metal rose as much as 2.8% to its highest since January 2013 at $1,688.66.

U.S. gold futures fell 1.1% to $1,658.60 an ounce.

"S&P futures jumped and regional stock markets opened higher, so we saw a temporary bout of selling pressure come through on gold," said Jeffrey Halley, senior market analyst at OANDA

"Now, we're seeing bargain hunters come in to buy gold. There are increasing concerns that the virus is becoming a global issue now rather than being contained in China."

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COVID-19 Vaccine

Frequently Asked Questions

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How does a vaccine work?

A vaccine works by mimicking a natural infection. A vaccine not only induces immune response to protect people from any future COVID-19 infection, but also helps quickly build herd immunity to put an end to the pandemic. Herd immunity occurs when a sufficient percentage of a population becomes immune to a disease, making the spread of disease from person to person unlikely. The good news is that SARS-CoV-2 virus has been fairly stable, which increases the viability of a vaccine.

How many types of vaccines are there?

There are broadly four types of vaccine — one, a vaccine based on the whole virus (this could be either inactivated, or an attenuated [weakened] virus vaccine); two, a non-replicating viral vector vaccine that uses a benign virus as vector that carries the antigen of SARS-CoV; three, nucleic-acid vaccines that have genetic material like DNA and RNA of antigens like spike protein given to a person, helping human cells decode genetic material and produce the vaccine; and four, protein subunit vaccine wherein the recombinant proteins of SARS-COV-2 along with an adjuvant (booster) is given as a vaccine.

What does it take to develop a vaccine of this kind?

Vaccine development is a long, complex process. Unlike drugs that are given to people with a diseased, vaccines are given to healthy people and also vulnerable sections such as children, pregnant women and the elderly. So rigorous tests are compulsory. History says that the fastest time it took to develop a vaccine is five years, but it usually takes double or sometimes triple that time.

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Asian equities were trying to stabilise after a wave of early selling petered out and Wall Street futures managed a solid bounce.

However, the coronavirus 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, while several Middle East countries were dealing with their first infections.

The rapid spread of the virus beyond China has heightened fears over its impact on the global economy, driving some bets that the U.S. Federal Reserve will be pressed to cut rates to cushion the hit.

"A Fed cut in April, as our U.S. economists expect, or further escalation in the COVID-19 outbreak is likely to propel the market higher and trade through $1700," UBS said in a note.

Lower interest rates reduce the opportunity cost of holding non-yielding bullion.

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

However, the Trump administration is considering asking lawmakers for emergency funding to ramp up its response to the epidemic, a White House spokesman said.

Among other precious metals, palladium gained 0.7% to $2,647.06 per ounce.

Silver slipped 0.3% to $18.58 an ounce, having touched its highest since early September in the previous session, while platinum inched up 0.1% to $964.46.
Reuters
first published: Feb 25, 2020 10:12 am

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