(Recasts, adds comments and updates prices)
* U.S. government agrees to massive stimulus package
* Platinum, palladium extend gains on S. Africa lockdown
* Global coronavirus infections at nearly 421,000
By Asha Sistla
March 25 (Reuters) - Gold prices retreated from a two-week high hit earlier on Wednesday as concerns about a sharp rise in coronavirus infections outweighed expectations of a $2 trillion U.S. government stimulus package to soften the economic fallout.
Spot gold, which rose as much as 5% on Tuesday, was down 0.4% at $1,604.28 per ounce at 1242 GMT, having earlier risen as high as $1,635.79.
U.S. gold futures fell 1.7% to $1,632.10.
“The U.S. stimulus had a huge positive impact initially but it was always questionable whether that would be sustainable in an environment of rapidly rising coronavirus cases,” OANDA analyst Craig Erlam said.
“The big downside risk (in gold) remains the potential for those sharp sell-offs in equity markets to be repeated, especially following yesterday’s huge rally.”
U.S. Senate majority leader Mitch McConnell said the fiscal stimulus package, expected to be worth $2 trillion, had been agreed upon and would be put to a vote later on Wednesday.
European stocks were choppy again on Wednesday with bourses across the region wiping off most of their early morning gains.
The world has been reeling from the impact of the virus, which has infected nearly 421,000 people and has forced lockdowns across the globe to combat its spread.
Spain reported 738 fatalities from the coronavirus in the past 24 hours, the steepest increase since the epidemic hit the country. Meanwhile in the UK, Prince Charles, the 71-year-old heir to the British throne, has tested positive the virus.
“We still see a favourable backdrop for gold as the economic fallout from the coronavirus crisis should strengthen safe-haven demand,” Julius Baer analyst Carsten Menke said.
Holdings in the world’s largest gold-backed exchange-traded fund, SPDR Gold Trust, rose 1.3% on Tuesday.
Benchmark spot gold prices traded below U.S. gold futures in a sign that the market is worried that air travel restrictions and refinery closures will hamper shipments of bullion to the United States to meet contractual requirements.
Among other metals, palladium rose 3% to $1,990.04 per ounce, while platinum gained 0.5% to $711.16. Both climbed more than 10% in the previous session after a lockdown in major producer South Africa.
Silver fell 1.3% to $14.09 per ounce.
Reporting by Asha Sistla and Sumita Layek in Bengaluru; Editing by Alexander Smith, Kirsten Donovan