By Barani Krishnan
Investing.com - Gold raced to seven-year highs on Friday, while accruing its biggest weekly gain in four years, as analysts targeted $1,700 as the next resistance for the yellow metal amid the rush into safe havens by investors fearing the coronavirus contagion.
Gold futures for April delivery on New York’s COMEX settled Friday’s trade settled up $28.30, or 1.7%, at $1,648.80 per ounce. The session high of $1,651.85 was the highest since February 2013. For the week, COMEX gold rose 4.2%, its biggest weekly advance since April 2016.
Spot gold, which tracks live trades in bullion was up $24.56, or 1.5%, at $1,643.97 by 2:44 PM ET (19:44 GMT). Bullion earlier rose to a seven-year high of $1,649.04.
This month, bullion and gold futures are up about 4%, similar to how they finished January, and are on track to a third-straight positive month that places them up 8% on the year.
Citigroup (NYSE:C) said that it expects gold to hit $1,700 in the next six to 12 months and $2,000 in the next 12 to 24 months.
Gold will “outperform on a risk market unwind should coronavirus risks impact supply chains and thus U.S. earnings momentum,” Citigroup’s precious metals analysts led by Ed Morse said.
Beijing, which already had a death toll of more than 2,000 and over 45,000 infections from the coronavirus, reported 118 new deaths and 1,109 new cases on Friday. South Korea reported 100 new infections, doubling its cases. In Japan, more than 80 people tested positive for the virus.
Factory activity in Japan also registered its steepest contraction in seven years in February, hurt by fallout from the outbreak.
But more than as a virus hedge, gold was also indicating that the Federal Reserve might cut U.S. rates again, Morse’s team said.
“With (short-term interest rate) markets pricing in (about) 1.5 Fed cuts in 2020 and global growth risks skewed to the downside, gold is a direct beneficiary of the low nominal and negative real yield environment,” the Citigroup (NYSE:C) analysts said.
TD Securities had a similar view.
“A portion of the recent surge can surely be attributed to a safe-haven bid, but risk markets have not experienced the pain that typically coincides with a haven bid, suggesting there is more to this rally in safe assets than just the uncertainty driven bid,” TD Securities daily note on precious metals said.
“Gold and rates appear to be telling the Fed they need to cut once again if their inflation goal is to be reached.”