Gold dips by 1% as dollar is on the rise amid Coronavirus crisis

The dollar index rose 0.4% after posting a nearly 1% gain overnight, as the Japanese investors and also companies rushed to cover greenback shortage before their fiscal year ends

The prices of gold dropped one percent on Tuesday as the dollar got stronger and the Chinese economic data boosted risk appetite, but the bullion was on the track for the sixth straight quarterly rise amidst fears of a global shutdown due to the coronavirus or COVID-19 outbreak.

Spot gold was down one percent at $1,605.64 per ounce by 0930 GMT. It has gained nearly six percent for the quarter, and about 1.4 percent this month. US gold futures fell 1.2 percent to $1,599.00. "The combination of a strengthening dollar and better risk appetite is weighing on gold," OANDA analyst Craig Erlam said.

Dollar index rose 0.4%

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The dollar index rose 0.4 percent after posting a nearly one percent gain overnight, as Japanese investors and companies rushed to cover a greenback shortage before their fiscal year ends. Strong Chinese factory data lifted world stocks on Tuesday but markets were heading their worst quarter since 2008 on jitters about the economic hit from the coronavirus.

More than 777,000 people have been infected by the new virus across the world and 37,561 have died, according to a Reuters tally. Central banks around the world have announced major fiscal and monetary packages to try to limit the economic damage, as governments have extended lockdowns to combat the virus' spread.

"With central banks unleashing a tsunami of quantitative easing (QE) at a time when fear is running rampant in markets and (as) government debts are about to explode, it seems like the perfect cocktail that could push gold back to record highs," said Ajay Kedia, director at Kedia Commodities in Mumbai.

Russia's central bank will stop buying gold starting April 1

Meanwhile, Russia's central bank announced it would stop buying gold starting April 1 and offered no explanation behind the decision. "On the technical side, (gold) prices could jump higher towards $1,675 if a solid daily close above $1,630 is achieved. Alternatively, sustained weakness below may open the door back towards $1,600," FXTM analysts said in a note.

Among other precious metals, platinum dropped 0.3 percent to $720.91 and was on track to post its biggest quarterly percentage decline since 2008. The world's largest platinum producers Anglo American Platinum, Sibanye-Stillwater and Impala Platinum have declared force majeure on contracts after a three-week national lockdown in South Africa forced operations to close. Palladium slipped 0.9 percent to $2,306.10 an ounce, while silver dropped one percent to $13.97, and was set to post its worst quarter since 2013.

The coronavirus outbreak has created a major stir around the world claiming the lives of over 37,000 and the death is increasing day by day. The outbreak has been described as a pandemic by the WHO and the epicentre has shifted to the US.

(With agency inputs)

Related topics : Coronavirus