A quiet start to the week is weighing on gold prices, but analysts remain optimistic that prices can push higher as easing from the People’s Bank of China could ignite a further drop in global interest rates.

Overnight, the PBOC the interest rate on its medium term loans in an attempt to counteract the economic hit from the growing coronavirus. However, the move has had little impact on gold prices as major North American markets are closed for holidays Monday. Spot gold prices on Kitco.com last traded at $1,581.40 an ounce, down 0.14% on the day.

Despite the weak price action Monday, many analysts are expecting that the PBOC’s latest move will continue to support the yellow metal.

Ole Hansen, head of commodity strategy at Saxo Bank, said that economists are still trying to estimate the full impact the spreading virus will have on the global economy. He added that this uncertainty will continue to support gold prices.

“We have seen monumental demand destruction this past month and that won’t be resolved anytime soon,” he said. “Central banks will be forced to ease again, but the question is just how much impact further easing will have.”

Looking at China’s economy, Bank of Montreal economists said that they have lowered their growth forecasts and expect China’s GDP to grow 5.25% this year.

“Given that China now accounts for just under 20% of global GDP, that downgrade translates… to a 0.2% cut to global economic growth,” the analysts said.

Afshin Nabavi, head of trading with MKS (Switzerland) SA, said that it is only a matter of time before gold prices push above $1,600 an ounce as growth fears continue to support investment demand.

BY KITCO NEWS