Gold edged higher on Friday and was on track for a strong weekly rise, driven by central bank stimulus measures and investor appetite for a safe haven as fears mount over the economic damage caused by the novel coronavirus.

Spot gold was up 0.1 percent at $1,732.69 per ounce by 1002 GMT, holding near a more than one-week high hit the precious session. Over the week, bullion has gained more than 2.7 percent. US gold futures gained 0.4 percent to $1,758.20 an ounce.

Spot gold was up 0.1%

Gold
Gold Pixabay

"Gold is holding up well and it's not surprising given the continuing volatility in other markets and people looking for safe havens," Commerzbank analyst Eugen Weinberg said. "In euro terms, gold has risen to an all-time high, which is definitely yet another proof of the continuing safe-haven demand and decreasing trust in central bank money." European shares fell in response to fears of a severe and lasting economic hit from the pandemic after a report raised doubts about progress in developing a treatment for COVID-19.

More than 2.7 million people have been reported to be infected by the virus globally. Central banks have adopted massive monetary measures to limit the economic damage as most countries extend lockdowns to curtail its spread. The US House of Representatives overwhelmingly approved a $484 billion coronavirus relief bill, while European Union leaders approved an immediate rescue package of about 500 billion euros.

Gold tends to benefit from widespread stimulus measures

Gold tends to benefit from widespread stimulus measures from central banks because it is widely viewed as a hedge against inflation and currency debasement. "In this new world in which both the European Central Bank and the US Federal Reserve continue to unleash new stimulus packages, dramatically increasing the liquidity of cash, combined with a lot of uncertainty, gold will remain in high demand and play a key role in any investor's portfolio," ActivTrades chief analyst Carlo Alberto De Casa said in a note.

"Technically the trend remains bullish and a climb above $1,730 would open space for the price to test $1,747 again, with a good chance of a new high being recorded for this haven asset." Holdings of the world's largest gold-backed exchange-traded fund, SPDR Gold Trust, rose to a near seven-year high. Elsewhere, palladium climbed 1.3 percent to $2,005.82 an ounce, but was on track to post its fourth straight weekly decline. Platinum gained 0.7 percent to $760.60 per ounce, while silver was steady at $15.30.