PRECIOUS-Gold gains as virus fears deepen after U.S. travel ban

Asha Sistla

(Updates prices, edits paragraph one)

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March 12 (Reuters) - Gold rose on Thursday on worries about the economic impact of the coronavirus as the United States suspended travel from virus-hit Europe, while palladium fell nearly 6% as the pandemic threatened demand for the autocatalyst metal.

Spot gold rose 0.5% to $1,642.46 per ounce by 0854GMT. U.S. gold futures were unchanged at $1,642.20.

The travel ban "is a big surprise and a big shock to the market" and shows that investors are yet to see the full financial fallout from the coronavirus outbreak, said IG Markets analyst Kyle Rodda. On the flip side, traders are selling gold to fund margin calls, capping the metal's gains, Rodda added. U.S. President Donald Trump on Wednesday announced the suspension of all travel from Europe, except from the United Kingdom, to the United States for 30 days, leading to a sell-off in global stock markets and the dollar.

However, the bullion did pare some gains from the 0.9% jump it saw earlier during the volatile session and stood well below a 7-year peak of $1,702.56 scaled on Monday. "Gold is now feeling the pinch from the fall in financial markets and travel ban. So, investors will keep money out of the markets for some time or book profits from the high levels, because of which we've seen some selling pressure in gold," said Vandana Bharti, assistant vice-president of commodity research at SMC Comtrade. The World Health Organization (WHO) on Wednesday described the new coronavirus as a pandemic, with more than 119,100 people infected globally. Global central banks have taken steps to shield their economies from the outbreak, with the Bank of England being the latest to cut interest rates on Wednesday. The U.S. Federal Reserve reduced rates in an emergency move last week. The European Central Bank is expected to follow suit when it holds its meeting later in the day. Lower interest rates reduce the opportunity cost of holding non-yielding bullion.

Elsewhere, auto-catalyst metal palladium dipped 3.2%

to $2,232.09, having earlier fallen as much as 5.9% to a near two-month low. "Palladium is one of the riskier assets," SMC Comtrade's Bharti said, adding that reduced demand from the automobile sector is weighing on the metal. The metal has shed about 22% since hitting an all-time high of $2,875.50 on Feb. 27, as demand concerns begin to overshadow a sharp supply shortfall of the metal.

Silver fell 0.4% to $16.69, while platinum

slid 0.9% to $852.51.

(Reporting by Asha Sistla and K. Sathya Narayanan in Bengaluru Editing by Aditya Soni and Uttaresh.V)

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