* 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 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 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.
“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 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.
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 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 rose 0.2% to $17.69 and platinum was 1% higher at $975.70. (Reporting by Sumita Layek in Bengaluru Editing by Lousie Heavens, David Goodman, Kirsten Donovan)