Gold gains as virus-led growth fears spur safe-haven buying

• Spot gold was up 0.3pc at $1,621.89 an ounce by 1145 GMT.
• Palladium fell 2.1pc to $2,222.42 an ounce, Platinum dropped 1.9pc to $727.08 and  silver slipped 3.3pc to $14.

Gold prices rose on Monday as investors sought safe havens amid fears over growing economic damage from the coronavirus after governments extended lockdowns to curtail its spread.

Spot gold was up 0.3pc at $1,621.89 an ounce by 1145 GMT.

U.S. gold futures edged 0.1pc higher to $1,625.70.

"Volatility due to COVID-19 is back in the markets. Gold profited a bit from safe-haven buying after stock markets dropped in Europe," said Quantitative Commodity Research analyst Peter Fertig.

"In the near term, gold should be supported by safe-haven buying, but if stock markets drop deeper, selling of gold to meet margin calls could re-emerge."

Investor appetite for riskier assets remained weak as fears mounted that the global coronavirus shutdowns could last for months, sending European shares lower for a second session and oil prices to their weakest in 17 years.

The pandemic has already driven the global economy into recession and countries must respond with "very massive" spending to avoid a cascade of bankruptcies and emerging market debt defaults, the head of the International Monetary Fund warned on Friday.

Central banks have rolled out a wave of fiscal and monetary measures to stem the economic hit from the virus, with China, Singapore and New Zealand the latest to add stimulus.

More than 720,000 people have been infected by the virus across the world and 33,969 have died, according to a Reuters tally.

The U.S. House of Representatives last week approved a $2.2 trillion aid package - the largest in history - to help cope with the virus-inflicted economic downturn.

Lower interest rates and looser economic policy tend to benefit gold because they cut the opportunity cost of holding non-yielding assets.

However, safe-haven gains for the U.S. dollar capped gold's rise, with the dollar index up 0.6pc.

"The huge amount of liquidity that the U.S. Federal Reserve is going to send into the markets has been unable to generate further gold rallies, but the scenario could quickly change," ActivTrades chief analyst Carlo Alberto De Casa said in a note.

Elsewhere, palladium fell 2.1pc to $2,222.42 an ounce, Platinum dropped 1.9pc to $727.08 and  silver slipped 3.3pc to $14.

"Negative impact from COVID-19 on the industrial sector is weighing on platinum and palladium prices. Longer lockdowns mean less demand for PGMs from car producers," said Quantitative Commodity Research's Fertig.

Platinum producer Sibanye-Stillwater said it would declare force majeure on supply contracts for platinum group metals (PGMs) after the temporary closure of its South African mines to comply with a three-week national lockdown.

Impala Platinum has also declared force majeure, a source with direct knowledge of the matter said.