By Noreen Burke
Investing.com -- Gold prices surged more than 2% on Monday, to over seven-year highs amid a broad-based flight to safety by investors fearful that the growing spread of coronavirus outside China will hit global economic growth.
Fears of a coronavirus pandemic grew after sharp rises in new cases reported in Italy, South Korea and Iran over the weekend, but China relaxed restrictions on movements in several areas including Beijing as its number of new cases slowed.
By 7:39 AM ET (1239 GMT), gold futures for delivery on the Comex exchange were up 2.1% at $1683.95 a troy ounce, after hitting an intra-day high of $1,691.55.
Spot gold was up 2.3% at $1,681.69.
"There seems to be a mix of short covering and a fear of missing out driving the gains (in gold), with $1,660 well supported on any pullbacks," MKS PAMP said in a note.
"Expect demand to remain firm through $1,660-$1,650, while there's little top-side resistance on the way to $1,700."
Gold’s move higher came as investors dumped shares and fled for the safety of bonds pushing yields (effectively interest rate expectations) sharply lower.
Ten-year U.S. Treasury yields dropped to 1.396%, their lowest since July 2016, while the yield on the 30-year Treasury touched a record low.
Central banks in China and Southeast Asia have already loosened policy to support their economies, but the Federal Reserve has given no indication so far that it intends to follow suit.
But money markets are now pricing in a one-in-four chance that the U.S. central bank will cut interest rates as soon as next month.
The chance of the Fed cutting interest rates by 25 basis points in March jumped to 26.6% on Monday, up from 11.1% late Friday and 6.6% the same time last week, according to Investing.com’s Fed Rate Monitor Tool.
Lower interest rates reduce the opportunity cost of holding gold.
Mirroring gains in gold, silver futures hit their highest in six weeks at $18.87 an ounce. Platinum futures were down 0.7% to $968.75 and copper futures, which tend to move inversely to gold, fell 1.7% to $2.57 a pound.
--Reuters contributed to this report