Is it a good time to buy gold as a safe-haven bet amid coronavirus fears?

Gold, which was hovering around $1,321 an ounce in January 2019, has already breached $1,600 per ounce in the past few sessions to a seven-year high.

For an asset class that has already seen an appreciation of around 25 per cent in a year, analysts expect the onset of coronavirus (Covid-19) to fuel a further upside in gold prices over the long-term should the panic spread. In the short-term (six months), however, they expect the upside to be limited given the rally since the past year.

Gold, which was hovering around $1,321 an ounce in January 2019, has already breached $1,600 per ounce in the past few sessions to a seven-year high.

“The effects of coronavirus is adding to global woes. At a time when we were beginning to think that there could be some resolution to the trade wars, the onset of coronavirus has dealt a double blow to an already slowing world economy,” says Kishore Narne, associate director for commodity research at Motilal Oswal Financial Services.

Meanwhile, the total number of coronavirus-related deaths in mainland China have crossed 2,700, while the number of confirmed cases in mainland China are above 78,400. Moody's Analytics has forecast a global recession if this health scare becomes a pandemic, and the odds of that are uncomfortably high and rising with infections surging in Italy and Korea.

“Gold prices are likely to remain range-bound in the next six months given the rally seen over the last one year. However, one needs to monitor coronavirus-related developments and how global economy plays out. A rise in cases / fatalities could push investors to safe-haven assets like gold and silver, which in turn will see their prices move up,” says G Chokkalingam, founder and managing director at Equinomics Research.

Policy-wise, global central banks are likely to resort to more stimulus measures in the form of rate cuts and/or pumping in more money to revive growth. All this can trigger a liquidity-driven rally in most asset classes, including gold.

How equities will react to this move will also depend on how corporate earnings play out, analysts say.