By Brijesh Patel
(Reuters) – Gold prices rose 1% on Wednesday as investors sought safe-havens after an historic slump in oil prices exacerbated fears of a global recession, with most countries remaining locked down in the grip of the coronavirus pandemic.
Spot gold was up 0.8% at $1,699.96 per ounce at 0951 GMT, after touching a near two-week low on Tuesday as a wider market sell-off drove a scramble for cash and prompted investors to sell precious metals to cover losses.
U.S. gold futures jumped 2% to $1,721.50.
“There is a lot of uncertainty in commodity markets after a drastic sell-off in crude oil. For gold, there is still safe-haven buying going on even though the dollar is holding steady,” Hareesh V, head of commodity research at Geojit Financial Services, said.
“Gold prices are expected to firm in the coming days. Overall, there is a lot of volatility in commodity markets. Gold has been on the positive side because of the coronavirus-related economic uncertainty.”
Oil slumped to less than $16 a barrel, hitting its lowest since 1999, with the market awash with excess supply as the economic fallout from the pandemic continues to hammer demand for fuels.
More than 2.54 million people have been reported to be infected by the novel coronavirus globally and 177,004 have died, according to a Reuters tally.
Many countries have extended lockdowns to curtail its spread and governments and central banks have rolled out a wave of fiscal and monetary support to try to limit the economic damage.
The U.S. Senate on Tuesday unanimously approved $484 billion in fresh relief for the world’s largest economy.
Gold tends to benefit from widespread stimulus measures from central banks, as it is often seen as a hedge against inflation and currency debasement.
Indicative of sentiment, holdings in the world’s largest gold-backed exchange-traded fund, SPDR Gold Trust, rose 0.4% to 1,033.39 tonnes on Tuesday.
“On the technical side, there is now quite a solid support zone placed at $1,675 per ounce and a clear break above $1,700 could open space for further rallies,” ActivTrades chief analyst Carlo Alberto De Casa said in a note.
“The resistance areas, where we would expect gold to struggle to continue its recovery, are placed at $1,710, at $1,735 and $1,747”
Among other precious metals, palladium gained 2.2% to $1,965.68 per ounce, having touched a near one-month low on Tuesday.
Platinum rose 0.6% to $751.20 per ounce, while silver eased 0.2% to $14.90.
(Reporting by Brijesh Patel and Shreyansi Singh in Bengaluru; Editing by Mark Potter)