Metals Stocks: Gold prices edge higher after hitting 3-week low

Gold prices traded slightly higher on Wednesday, as the precious metal tried to rebound after settling at a three-week low.

The precious metal, however, was contending with a number of headwinds as it stepped tentatively higher, including those from a stronger dollar, rising government bond yields and a buoyant global equity market, which was climbing on the back of unconfirmed reports of treatments for an Asian viral outbreak.

Researchers at Zhejiang University said they found an effective drug to treat coronavirus patients, according to a Chinese newspaper. Separately, a team of U.K. scientists claimed progress toward a vaccine.

Still, the World Health Organization has said that there are “no known effective therapeutics” against the virus, in response to the media reports

Fears that the virus could at least temporarily damage China’s economy had helped to lift gold prices but gains were unwound as assets perceived as risky have climbed in recent trade, including the Dow Jones Industrial Average DJIA, +1.44%, the S&P 500 index SPX, +1.50%, helping drive government bond yields firmly higher.

Gold for April delivery GCJ20, +0.23% on Comex was up $2.50, or 0.2%, at $1,558.10 an ounce, after tumbling 1.7%, to mark the lowest settlement for a most-active contract since Jan. 16, according to FactSet data.

March silver SIH20, +0.36% was adding 6 cents, or 0.4%, at $17.625 an ounce, after it skidded 0.6% lower on Tuesday.

Analysts at UBS said they remain bullish on gold due to expectations the Federal Reserve will maintain interest rates at lower levels and maintain a $1,600 an ounce price target. Gold tends to attract stronger interest when yields remain low because the asset doesn’t offer a coupon.

“Dovishness from the Federal Reserve has also added to gold’s appeal. We reiterate our gold forecast of USD 1,600/oz in 2020.” wrote UBS Global Wealth Management analysts Dominic Schnider and Wayne Gordon, in a Wednesday research note.

Still, gains in the 10-year Treasury note TMUBMUSD10Y, +2.80% was rising steadily from its lows and was at 1.65%, after falling below 1.6% earlier in the week. The U.S. dollar, meanwhile, was rising 0.2%, as measured by the ICE U.S. Dollar Index DXY, +0.21%, a measure of the buck against a half-dozen currencies.

A stronger dollar can make precious metals more expensive to buyers using other currencies.