Gold rises on virus fears after Tuesday's sharp drop

GOLD - JAKARTA. Gold prices firmed on Wednesday, recovering from a sharp drop in the previous session, as safe-haven demand was boosted by worries over a fast-spreading coronavirus outbreak in China.

Spot gold was up 0.3% to $1,556.08 per ounce by 0328 GMT, after declining 1.5% on Tuesday - the biggest since early November. U.S. gold futures rose 0.3% to $1,560.00.

"There's an increase in demand (for gold) because of flight to safety with the coronavirus and concerns about (economic) growth," said John Sharma, an economist at National Australia Bank (NAB).

"We are still witnessing deaths and quarantine problems. As long as deaths are around, there'll still be increasing demand for gold."

The death toll in China passed 490, as two U.S. airlines suspended flights to Hong Kong following the first fatality there and 10 cases were confirmed on a quarantined Japanese cruise ship.

Gold is considered a safe haven in times of political and economic uncertainty.

Read Also: Virus worries wipe $420 billion off China's stock market

Underpinning the metal further was a private sector survey that showed growth in China's services sector slowed for a second straight month in January, a traditionally busy sales season.

Meanwhile, Asian stocks steadied by China's efforts to support its economy jolted by the outbreak that is expected to have a devastating impact on first-quarter growth.

"Gold will be more towards $1,550-$1,575 range rather than $1,600, which looks a bit distant, unless there's a surge in the number of deaths (from the virus)," said NAB's Sharma.

The virus would delay a surge in U.S. exports to China expected from the Phase 1 trade deal set to take effect this month, the White House's top economic adviser said on Tuesday.

Among other precious metals, palladium fell 0.3% to $2,426.23 an ounce, after touching a near two-week peak of $2,438.00 earlier in the session.

Silver inched up 0.2% to $17.61, and platinum shed 0.2% to $961.49.