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Gold retreats from an over 7-1/2 year high

(Reuters) - Gold weakened after hitting an over 7-1/2-year high earlier on Wednesday, with investors selling the precious metal along with other asset classes as a rise in global coronavirus cases led a flight to cash.

FILE PHOTO: Gold bars and granules are displayed in the Austrian Gold and Silver Separating Plant Oegussa in Vienna June 2, 2009. REUTERS/Leonhard Foeger/File Photo

Spot gold eased 0.1% to $1,764.99 per ounce as of 12:20 p.m. EDT (1620 GMT), trading below $1,779.06 scaled earlier in the session, which was its highest since early October 2012.

U.S. gold futures eased 0.3% to $1,776 per ounce.

“People are just going to cash. They’re lightning up the investments in their portfolios,” said Michael Matousek, head trader at U.S. Global Investors, citing the rise in COVID-19 infections.

“When it’s risk-off for pretty much everything, you have people selling gold. They’re selling a little bit of everything across the board.”

Rising concerns about the coronavirus pandemic accelerating sent global equities lower Wednesday.

Gold's performance versus other assets

Other precious metals also fell, with silver declining 1.2% to $17.74 per ounce. Palladium slipped 2.3% to $1,880.29 and platinum fell 2.8% to $805.95.

Despite a slight pullback in prices, gold has climbed more than 16% this year, supported by stimulus measures and interest rate cuts by central banks.

The non-yielding metal is considered a hedge against inflation and currency debasement.

“Long-run inflation expectations are still subdued and have substantial room to rise,” said Daniel Ghali, commodity strategist at TD Securities.

“When you have low interest rates and rising inflation, that means that real rates are getting suppressed and that’s the factor driving gold prices higher.”

Indicative of investor sentiment, holdings in SPDR Gold Trust rose 0.28% to 1,169.25 tonnes on Tuesday, its highest since April 2013.

The rise in cases of COVID-19 has spurred debate over whether lockdowns of businesses will be reinstated, which would mean further damage to recovering economies, said Kitco Metals senior analyst Jim Wyckoff.

Gold as a safe-haven asset could see a further surge in demand as a result.

Reporting by Swati Verma and Shreyansi Singh in Bengaluru; Editing by Bernadette Baum and Jonathan Oatis