Gold prices rose on Wednesday, recovering from a sharp drop in the previous session, as safe-haven demand was boosted by worries over a fast-spreading coronavirus outbreak in China. Spot gold gained 0.6% to $1,561.62 per ounce by 0801 GMT, after declining 1.5% on Tuesday - the biggest since early-November. US gold futures climbed 0.7% to $1,565.60 per ounce.
"There's an increase in demand (for gold) because of flight to safety with the coronavirus and concerns about (economic) growth," said John Sharma, an economist at National Australia Bank (NAB).
"We are still witnessing deaths and quarantine problems. As long as deaths are around, there'll still be increasing demand for gold."
"Gold tested and failed numerous times ahead of $1,590 an ounce over the last week. It implies that the Wuhan situation would need to escalate sharply to give gold the necessary momentum to rise above $1,600 an ounce," Jeffrey Halley, senior market analyst at OANDA, said in a note.
Gold hit a four-week high of $1,591.46 an ounce earlier this week, before paring gains as risk appetite improved after China took measures to cushion the economic impact of the outbreak.
The metal may retest a support at $1,549 per ounce, with a good chance of breaking below this level and falling towards the Jan. 14 low of $1,535.75, said Reuters technical analyst Wang Tao.