BENGALURU (REUTERS) - Gold rose more than 1 per cent on Monday (March 2), rebounding from a steep decline across precious metals in the previous session, amid investor hopes the United States Federal Reserve will cut interest rates to cushion the impact of the fast-spreading coronavirus.
Spot gold gained 1.2 per cent to US$1,603.19 (S$2,227.39) per ounce by 0904 GMT (5.04 pm Singapore time).
US gold futures rose 2.5 per cent to US$1,606.00.
Gold prices plunged over 4.5 per cent on Friday, with precious metals joining a broader market selloff as investors liquidated positions to meet margin calls in other assets.
"On Friday, the US Federal Reserve board hinted they're going to be dropping interest rates and that's a great thing for gold right off the bat," said Mr Stephen Innes, chief market strategist at financial services firm AxiCorp.
Fed Chair Jerome Powell said that while the US economy remained strong, the coronavirus "posed an evolving risk" and the central bank stood ready to take action if needed.
Lower interest rates reduce the opportunity cost of holding non-yielding bullion.
Fed fund futures showed that traders expect a 75 basis point rate cut by the US central bank at its March monetary policy meeting.
"The dollar is weaker, the euro strengthened, and this (suggests) gold will go up," Mr Innes said, adding the negative correlation between the US currency and the yellow metal has materialised again since the dollar's safe-haven appeal has faded.
Benchmark US 10-year Treasury yields fell to a record low, while the Japanese yen rose to its highest against the dollar since October.
Meanwhile, factory activity in China contracted at the fastest pace ever in February, even worse than during the global financial crisis, data showed on Saturday, highlighting the damage from the outbreak.
Other metals also regained some ground following Friday's free fall, with palladium rising 2.8 per cent to US$2,666.92 per ounce after shedding as much as 13 per cent on Friday - its biggest one-day percentage decline since the 2008 financial crisis.
Gains in palladium and platinum are temporary as the metals are plagued by demand risks from industries including automobile due to the coronavirus epidemic, said Mr Ajay Kedia, director at Kedia Commodities in Mumbai.
Platinum gained 1.7 per cent to US$878.63, while silver rose 1.9 per cent to US$16.98, after both metals fell to their lowest in about six months in the previous session.