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Gold futures on Tuesday traded lower, facing pressure as one of the commodity’s biggest buyers faced a viral outbreak that could hurt buying of physical gold at a peak holiday period.
U.S. markets were closed on Monday in observance of Martin King Luther Jr. Day.
“This unfavourable development could not come at a more critical time with many people expected to travel within China before the Lunar New Year,” wrote Lukman Otunuga, senior research analyst at FXTM, in a daily research note.
“The outbreak certainly presents an economic risk to China and its close neighbours, especially if tourism, air travel and other industries are affected,” he wrote.
According to the Associated Press, six people have died and 291 have been infected in China, the National Health Commission said Tuesday.
A number of countries have already adopted screening measures for travelers from China, especially those arriving from Wuhan, due to concerns about a global outbreak similar to SARS, another coronavirus that spread from China to more than a dozen countries in 2002-2003.
Against that backdrop, gold has faced some pressure lower.
Gold for February delivery GCG20, -0.52% on Comex fell $4.90, or 0.3%, at $1,555.40 an ounce, while March silver SIH20, -1.98%, meanwhile, lost 9 cents, or 0.5%, to $17.985 an ounce.
Last week, gold futures gained about 20 cents higher than last Friday’s settlement, following gains for each of the last three weeks, according to FactSet data. Silver fell about 0.2% for the week.
Bullion may yet draw haven bids if the virus manifests into a genuine outbreak in Asia. Chinese health experts have confirmed that it could be transmitted between humans.
Asian markets, reacted poorly to the development, with China’s CSI 300 index 000300, -1.71% closing 1.7% lower, while Hong Kong’s Hang Seng stock index HSI, -2.81% slumped 2.8%.
“Gold is set to remain the prime destination for safe haven buyers this week as developments in China and caution ahead of the Davos summit dent risk sentiment,” wrote Otunuga, referring to an annual gathering of business leaders in Davos, Switzerland.
