Picture used for illustration. File

Gold prices rose to their highest in nearly eight years on Wednesday as a spike in coronavirus cases sparked concerns over the economic recovery from the pandemic and boosted demand for safe-havens.

Spot gold hit its highest since early October 2012 at $1,788.96 in early trade, and by 0958 GMT was at $1,787.31 per ounce, up 0.4%. U.S. gold futures were up 0.3% at $1,805.10 per ounce.

"Uncertainty about the coronavirus, particularly in the U.S, which could put the brakes on an economic recovery, and the ultra-loose monetary policy of central banks are giving support to gold," said Commerzbank analyst Daniel Briesemann.

A rise in negative-yielding global bonds was also adding to the metal's appeal, he said. Lower bond yields reduce the opportunity cost of holding non-interest bearing gold.

But with investment demand likely to be higher than jewellery consumption this year, especially with practically no physical demand in Asia, gold's price gains are "somewhat fragile", he added. 

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The United States recorded its biggest one-day spike in COVID-19 cases since the start of the pandemic on Tuesday, with the government's top infectious disease expert warning that infections could double.

U.S. Treasury Secretary Steven Mnuchin and Federal Reserve Chairman Jerome Powell pledged to continue to support the economy, which has been hammered by the pandemic.

Reflecting high investor demand, holdings in the world's largest gold-backed exchange-traded fund, SPDR Gold Trust , increased by 211.9 tonnes, or nearly 22%, in the second quarter.

"Technically the situation remains firmly bullish with investors betting on further (money) printing activity from central banks," said ActivTrades chief analyst Carlo Alberto De Casa.

Gold tends to benefit from widespread stimulus from central banks because it is widely considered a hedge against inflation and currency debasement. Palladium was down 0.6% at $1,918.72 per ounce, while platinum fell 0.4% to $813.21 per ounce and silver gained 1.5% to $18.39 per ounce. 

Reuters