XAU/USD: gold at high since 2013 due to Coronavirus, are we headed for quick rise to $1,700 per ounce?

The precious metal continues to break records: on Friday, the price of gold reached its highest level in several years and is expected to post its best week in a month and a half, as demand for the safe haven asset has been boosted by an increase in new cases of coronavirus.

South Korea reported 49 new cases of Coronavirus, bringing the national total to 160, while Japan reported the first deaths on the media-reported cruise ship, the largest group of infections outside of China.

Cash gold rose 0.3% to $1,640 per ounce, its highest level since early 2013. For last week, prices rose 2.4% and were expected to post their largest weekly percentage increase since the beginning of this year.

"Gold seems to be mainly affected by the uncertainty of the virus ... and it has spread around the world," says John Sharmo, an economist at National Australia Bank, adding that the epidemic's impact on tourism, travel and growth is now fuelling demand for gold.

"Suddenly, the situation in Korea, the Japanese ship and Singapore airlines cutting back on many of their services is spreading fear ... it's not very encouraging in terms of growth, investing, or consumer and business confidence," Sharmo says.

The continued spread of the epidemic could derail the "very fragile" recovery expected in the global economy this year, the International Monetary Fund warns.

China cut its benchmark lending rate on Thursday to mitigate the impact of the virus on its economy and is expected to take further steps.

The holdings of the world's largest exchange-traded fund, the SPDR Gold Trust, rose 0.26% to 933.89 tonnes on Thursday, the highest level since late 2016.

Going forward, cash gold could reach a range of $1,640 to $1,685 an ounce, Reuters technical analyst Wang Tang says. Citi Bank analysts recently raised their 6-12 month target for gold to $1,699 per ounce.

Daily XAU/USD chart