Gold prices rose to their highest in more than two weeks on Monday as equities slipped on growing concerns that a China virus outbreak could impact that nation’s economy, prompting investors to drop riskier assets and look for safe havens.
Spot gold climbed 0.5% to $1,577.93 per ounce by 0743 GMT. Earlier in the session, prices rose as much as 1% to their highest since Jan. 8 at $1,586.42.
U.S. gold futures rose 0.3% to $1,576.50.
Asian stocks slipped as the coronavirus killed 81 people and infected more than 2,700 in China, with residents of Hubei province, where the disease originated, banned from entering Hong Kong amid global efforts to halt the rapid spread.
Investors are “looking out for the new risk (coronavirus) coming into the markets and running for the exits in equity markets, that’s the cause for gold to move higher,” Stephen Innes, chief market strategist at AxiCorp, said.
“The virus is going to hurt the Chinese economy to a certain degree,” he added.
The outbreak has curbed Lunar New Year celebrations in China, when hundreds of millions of people would normally be travelling around the country, and also led the government to extend the holidays to Feb. 2 as a preventive measure.
Gold is considered a safe investment during times of political and economic uncertainty.
“The continuation of the gold rally will rely on developments for good, or for ill, of the Wuhan virus situation,” Jeffrey Halley, senior market analyst, OANDA, said in a note.
Meanwhile, the yen rose on worries that authorities are struggling to contain the outbreak.
Hedge funds and money managers cut their bullish positions in COMEX gold contracts in the week to Jan. 21, data showed on Friday.