Oil slides while gold heads to $1 700 as virus rocks commodities

RENEWED fears that the coronavirus will harm global growth rocked commodity markets again on Monday, with oil and metals prices tumbling while gold soared toward $1 700 an ounce amid a global flight to haven assets.
As the deadly virus spreads more widely outside China, raising the threat of a global pandemic, finance chiefs and central bankers from the world’s largest economies said they see downside risks to the world economy persisting.
That’s spurring fresh alarm in commodity markets that had started to recover from lows hit earlier in the month when China’s virtual shutdown threw supply chains into chaos.
With the International Monetary Fund cutting its global growth forecast and warning that it’s also looking at more “dire” scenarios, investors are concerned that risks to raw material demand are worsening.

“With the volatility we’re seeing in the coronavirus event, that’s creating angst in the market on the back of growth and demand expectations and we’ve seen oil prices weaken,” said David Lennox, a resource analyst at Fat Prophets in Sydney.
“The converse of that is the same event is carrying investors toward a safe haven play and that’s gold.”

Oil led the losses in early Asian trade on Monday morning, tumbling more than 3 percent in London and New York.
Until Friday, Brent crude had been in the longest run of gains in more than a year thanks to Chinese fiscal stimulus and new threats to supplies from Africa and Latin America.
Industrial commodities are also getting hit hard, with copper sliding 1,3 percent on the London Metal Exchange and rubber tumbling more than 2 percent in Singapore. Agricultural commodities weren’t spared, with U.S. wheat leading losses.
The declines reflect a broader market sell-off as the spread of coronavirus cases outside China spooks investors. US equity futures sank with Asian shares from Seoul to Sydney, while the Australian dollar retreated along with the offshore yuan.
South Korea said it had 161 additional virus cases, along with two more deaths, to bring the total death toll there to seven.
The nation earlier raised its infectious-disease alert to the highest level after a 20-fold increase in cases.
The situation in Europe was also escalating, with Austria halting a train from Italy on concern there were two infected passengers on board. Italy — now the virus’s epicenter on the continent — canceled the Venice Carnival and other events amid a rising case load.
As they flee riskier assets, investors are searching for safety, sending gold prices to fresh 7-year highs as bonds and Treasury futures also advance.
Bullion prices have taken off this year, rising almost 10 percent, as concerns over the virus deepened and speculation mounted that the U.S. Federal Reserve will ease monetary policy if the global impact worsens.
“The spread of the Covid-19 to Italy and South Korea is threatening the rebounds in asset prices and that fear is driving gold prices higher,” said Howie Lee, an economist at Oversea-Chinese Banking Corp. in Singapore.
“Upward momentum is strong and interest in gold is set to remain high until the situation abates.”
The havoc wreaked by the virus in China is a stark warning for investors as it spreads outside Asia. — Bloomberg