Gold Prices Surge On Fed Outcome, Economic Concerns Over Coronavirus

On Thursday, gold rose in the international and domestic markets after the US Federal Reserve's decision to hold interest rates steady. Further, increased concerns on coronavirus outbreak affecting the global economy also benefited the precious metal.

On MCX, gold futures (Feb 2020) inched up by 0.6 percent to an intraday high of Rs 40,625 per 10 grams and silver futures (March 2020) rose by close to 1 percent to Rs 45,975/kg.

In the international market, spot gold was up by 0.1 percent to $1,578.05 an ounce.

On Wednesday, the US Federal Reserve held its key interest rates unchanged with its Chairman Jerome Powell pointing to continued moderate economic growth and a "strong" job market.

Powell also said the new coronavirus outbreak is "a significant thing which will have some effects on the Chinese economy, at least in the short term."

As the death toll from the epidemic hit 170, the World Health Organisation (WHO) said on Thursday that it will reconvene to decide whether the new virus from China constitutes a global emergency.

Restrictions on travel, cancelled tours, temporary restaurant closures and lockdowns in China is likely to hurt its already slowing economy.

Wuhan, the epicentre of the outbreak makes for one percent of the country's GDP. The city was expected to grow at 7.8 percent in 2020 according to local government estimates, and was significant to aid growth in the Chinese economy as a whole.

Further, if the situation takes longer to subside, it will hurt exports, output and corporate profits of companies that are impacted by production and consumption in China.

Tour operators in Thailand and Japan have been affected after China banned outbound group tours to contain the spread of the virus.

Starbucks closed 2,000 outlets in China to help its staff and support government efforts to contain the infection. Having temporarily shut half of its outlets it the country, which accounts for 10 percent of its global revenue, its business will be affected in the short-term.

Amid growing uncertainty on the economic impact of the fast-spreading virus investors have increased buying in the safe-haven metal, pushing gold prices higher.