PRECIOUS-Gold rises 1% as virus risks boost rate cut hopes

(Adds graphic, updates prices)
* Traders expect 75 basis point rate cut by Fed -FEDWATCH
* China factory activity contracts at fastest pace ever in
Feb
* U.S. 10-year Treasury yields fall to record low
* GRAPHIC-2020 asset returns: http://tmsnrt.rs/2jvdmXl

By K. Sathya Narayanan
March 2 (Reuters) - Gold rose more than 1% on Monday,
rebounding from a steep decline across precious metals in the
previous session, amid investor hopes the U.S. Federal Reserve
will cut interest rates to cushion the impact of the
fast-spreading coronavirus.
Spot gold XAU= gained 1.2% to $1,603.19 per ounce by 0904
GMT. U.S. gold futures GCv1 rose 2.5% to $1,606.00.
Gold prices plunged over 4.5% on Friday, with precious
metals joining a broader market selloff as investors liquidated
positions to meet margin calls in other assets.
"On Friday, the U.S. Federal Reserve board hinted they're
going to be dropping interest rates and that's a great thing for
gold right off the bat," said Stephen Innes, chief market
strategist at financial services firm AxiCorp.
Fed Chair Jerome Powell said that while the U.S. economy
remained strong, the coronavirus "posed an evolving risk" and
the central bank stood ready to take action if needed.
Lower interest rates reduce the opportunity cost of holding
non-yielding bullion.
Fed fund futures FEDWATCH showed that traders expect a 75
basis point rate cut by the U.S. central bank at its March
monetary policy meeting.
"The dollar is weaker, the euro strengthened, and this
(suggests) gold will go up," Innes said, adding the negative
correlation between the U.S. currency and the yellow metal has
materialised again since the dollar's safe-haven appeal has
faded. .DXY USD/
Benchmark U.S. 10-year Treasury yields fell to a record low,
while the Japanese yen JPY= rose to its highest against the
dollar since October. US/
Meanwhile, factory activity in China contracted at the
fastest pace ever in February, even worse than during the global
financial crisis, data showed on Saturday, highlighting the
damage from the outbreak. Other metals also regained some ground following Friday's
free fall, with palladium XPD= rising 2.8% to $2,666.92 per
ounce after shedding as much as 13% on Friday - its biggest
one-day percentage decline since the 2008 financial crisis.
Gains in palladium and platinum are temporary as the metals
are plagued by demand risks from industries including automobile
due to the coronavirus epidemic, said Ajay Kedia, director at
Kedia Commodities in Mumbai.
Platinum XPT= gained 1.7% to $878.63, while silver XAG=
rose 1.9% to $16.98, after both metals fell to their lowest in
about six months in the previous session.

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Safe haven rush: gold versus dollar https://tmsnrt.rs/388cUmI
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