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Gold dips as virus spread eclipses U.S. aid; palladium races higher

By Sumita Layek
FILE PHOTO: One kilo gold bar is displayed in shop in Dubai's gold souk

By Sumita Layek

(Reuters) - Gold prices slipped on Wednesday, after gaining over the previous three sessions, as rising coronavirus cases and the global economic toll from the disease overshadowed hopes fueled by a $2 trillion U.S. government stimulus package.

Deficit-hit palladium, meanwhile, soared more than 15% as coronavirus-led closures further squeezed supply of the auto-catalyst metal.

Spot gold was down 0.2% at $1,607.57 per ounce at 10:56 a.m. EDT (1456 GMT). Prices surged as much as 5% on Tuesday.

U.S. gold futures slid 1.6% to $1,633.70, having posted their biggest one-day jump since 2009 in the last session.

"It's very volatile because we have a coronavirus-hit gold market now, we've got supplies from three of the biggest refiners offline in Switzerland and gold is not in the right place where it is needed. So it's creating a lot of nervousness," said Saxo Bank analyst Ole Hansen.

The benchmark spot gold prices traded below U.S. gold futures in a sign that the market is worried that air travel restrictions and refinery closures will hamper shipments of bullion to the United States to meet contractual requirements.

U.S. exchange operator CME Group on Tuesday announced a new gold futures contract to combat price volatility caused by the shutdown of gold supply routes, but traders and bankers said it would not immediately calm markets.

Investors are now awaiting U.S. Senate's vote later in the day on a $2 trillion package to alleviate the devastating economic impact of the coronavirus pandemic.

"Governments are putting a lot of money into the hands of people, but the only thing that people are worried about is buying food, so it's not going to have any immediate impact," Hansen said.

The Wall Street also gave up its gains after a massive bounce in the previous session.

The virus has infected nearly 421,000 people, forcing lockdowns across the globe to combat its spread and has prompted countries and central banks worldwide to step in with policy aids.

Among other metals, palladium soared 15% to $2,207.06 per ounce, while platinum gained 1.7% to $719.94. Both metals climbed more than 10% in the previous session.

"Platinum and palladium have also surged heavily in recent days, as a positive precious metal environment was met with a 21-day mine closure in South Africa amid virus concerns," analysts at TD Securities said in a note.

The country on Wednesday said that the processing of platinum group metals (PGMs) would continue during national lockdown.

Silver fell 0.2% to $14.24 per ounce.


(Reporting by Swati Verma and Sumita Layek in Bengaluru; Editing by Tom Brown)