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Gold at one-week low as abating virus fears whet risk appetite

(Reuters) - Gold prices edged lower to a near one-week low on Wednesday, hurt by an improvement in risk sentiment as a drop in the number of new coronavirus cases comforted markets that the epidemic’s effects could be contained.

FILE PHOTO: Gold coins are displayed at the Ginza Tanaka store in Tokyo September 18, 2008. REUTERS/Yuriko Nakao

Spot gold was down 0.2% to $1,564.66 per ounce by 10:09 a.m. EST (1509 GMT), having touched its lowest since Feb. 6 at $1,561.16 earlier.

U.S. gold futures edged 0.2% lower to $1,567.70.

“It’s basically just risk-on (sentiment) here. Some of the coronavirus fears seem to be fading a little bit and safe-haven buyers who where buying gold are starting to unwind some positions,” said Ryan McKay, a commodity strategist at TD Securities.

“Gold is going to continue to trade range-bound... but the underlying factor that’s supporting gold is the Federal Reserve and the central banks globally, especially when the interest rates have been kept really low.”

Investors appetite for riskier assets grew as a drop in the number of new coronavirus cases and the Federal Reserve chairman’s optimistic view of the economy lifted world stocks for a third day. [MKTS/GLOB]

China reported its lowest number of new virus cases since late January, lending weight to a prediction from its senior medical adviser that the outbreak might be over by April.

Also limiting gold’s appeal, the dollar held near a four-month high against a basket of rivals, making the metal expensive for investors holding other currencies. [USD/]

Fed Chair Jerome Powell on Tuesday told Congress the U.S. economy was in a good place, but cited the potential threat from the virus epidemic and concerns about the economy’s long-term health.

However, it was still unclear as to what extent economic growth would take a hit from the fast-spreading virus that has killed more than 1,100 people, shuttered businesses in China and roiled financial markets since late January.

“With a plethora of global risk simmering on the backburner – supply chains and demand contraction notwithstanding, I still think it’s too early to downgrade Covid-19 to a nasty case of the sniffles and gold will remain bid on a dip,” Stephen Innes, chief market strategist at AxiCorp, said in a note.

Holdings of the world’s largest gold-backed exchange-traded fund, SPDR Gold Trust, rose 0.67% to 922.23 tonnes on Tuesday, the highest in over three months.

In other precious metals, palladium was steady at $2,340.07 an ounce, silver fell 0.8% to $17.49 to a one-week low and platinum slipped 1.4% to $955.45.

Reporting by Brijesh Patel in Bengaluru; Editing by Marguerita Choy