PRECIOUS-Gold falls as China's virus measures boost risk appetite

(Updates prices)
* Gold could find strong support at $1,565/oz level -analyst
* Palladium jumps more than 3%

By Sumita Layek
Feb 4 (Reuters) - Gold fell to its lowest in nearly a week
on Tuesday as the dollar firmed and equities gained after
Chinese measures to minimise the economic impact from the
coronavirus epidemic stoked investors' risk appetite.
Spot gold XAU= was down 0.6% at $1,566.74 an ounce by 1303
GMT, having hit its lowest since Jan. 29 at $1,564.99 earlier in
the session. U.S. gold futures GCcv1 fell 0.7% to $1,571.10.
World markets bounced as Chinese stocks reversed some of the
previous coronavirus-related plunge, buoyed by official efforts
to soothe nerves over the outbreak that has claimed 427 lives so
far. MKTS/GLOB "Sentiment improved as China announced measures (against the
virus impact) and on positive readings in the U.S. manufacturing
data. This is why we're seeing a flight out of the safe havens
(such as gold) into riskier assets," said Quantitative Commodity
Research analyst Peter Fertig.
The dollar .DXY strengthened, making gold more expensive
for buyers using other currencies, having gained by 0.4% the
previous day on a January rebound in U.S. factory activity after
five months of contraction. USD/ The virus outbreak, which coincided with the Lunar New Year
holidays, has stifled economic activity in the country as cities
have been locked down, with travel restricted and businesses
shut.
However, investors remain uncertain about the magnitude of
the impact on Chinese and global growth.
"In case the impact of the virus is less than the market has
priced in, it could lead to a correction in gold prices, but as
long as we don't see economic growth accelerate, gold prices
will remain supported," Fertig said.
Some traders have also started to price in a cut to U.S.
interest rates by June.
Gold could find strong support at the $1,565 level,
ActivTrades chief analyst Carlo Alberto De Casa said in a note.
Among other precious metals, palladium XPD= was up 3.4% at
$2,399, having earlier jumped to its highest since Jan. 27 at
$2,407.51.
"Now that optimism has returned to financial markets, it
seems that market participants have forgotten their fears of how
the spread of the coronavirus might affect demand," Commerzbank
analysts said in a note.
"Nonetheless, the consequences for China, the main consumer
of palladium, are likely to be very serious."
Silver XAG= rose 0.2% to $17.69 and platinum XPT= was 1%
higher at $975.70.