Gold edged higher Tuesday, as continued worries over the COVID-19 epidemic in China put pressure on stocks and sparked demand for assets perceived as havens, including gold and Treasurys.
“Gold is finding buoyancy from increased risk aversion, as reflected also in falling stock markets and declining bond yields. The gold price is continuing to defy the firm U.S. dollar, which on a trade-weighted basis is priced at a 4½-month high,” said Carsten Fritsch, analyst at Commerzbank, in a note.
The demand for havens also sent down bond yields. The yield on the 10-year U.S. Treasury note TMUBMUSD10Y, -1.34% fell 4.2 basis points to 1.545%. Lower yields can also enhance the attractiveness of gold by reducing the opportunity cost of holding non-yielding assets.
A stronger U.S. dollar, however, might be limiting gains. The ICE U.S. Dollar Index DXY, +0.43%, a measure of the currency against a basket of six major rivals, rose 0.4% to 99.39, after trading at a more-than-four-month high. A stronger dollar can be a drag for gold and other commodities priced in the unit, making them more expensive to users of other currencies.
March copper HGH20, -0.04% edged up by less than 0.1% to $2.6005 a pound.