* Dollar eases from four-month high, stocks falter
* Coronavirus death toll surges to daily record 242 in Hubei
* Palladium deficit expected in 2020 - Johnson Matthey
By Sumita Layek
Feb 13 (Reuters) - Gold gained on Thursday after a sharp rise in new coronavirus cases and deaths in China dampened risk sentiment, prompting investors to buy the metal.
Spot gold was up 0.6% at $1,574.50 per ounce at 1250 GMT and U.S. gold futures were 0.4% higher at $1,577.70.
"This spike in the numbers has just knocked the wind out of the sizeable bet...So, we are seeing risk markets cool off and gold is catching some bids," OANDA analyst Craig Erlam said.
After reports of a decline in new coronavirus cases, China said there had been a record rise in deaths and cases under a new diagnostic method, a potential threat to the global economic outlook.
A rally in stock markets reversed after health officials in Hubei reported 242 people had died from the virus on Wednesday, the fastest daily rise so far.
The dollar eased from a four-month peak against a basket of currencies, further increasing gold's appeal.
China's Hubei province also extended a work suspension and asked all enterprises not to reopen before the end of Feb. 20.
"There will be spillover particularly through big export and import markets ... but those impacts are going to be short-term because once people start returning to their normal lives, the economy will bounce back," Erlam said.
Federal Reserve Chair Jerome Powell on Wednesday reiterated his confidence in the U.S. economic outlook, despite some drag "soon" from the coronavirus epidemic.
"We've got some short term support from this issue in China, although factors such as low U.S. interest rates, higher market volatility due to the late economic cycle and upcoming presidential elections should continue to support gold," said UBS commodities analyst Giovanni Staunovo.
Palladium shed 0.4% to $2,395.80 per ounce, having hit a one-week high earlier in the session.
Rising demand from automakers pushed the palladium market to its biggest deficit for five years in 2019 and the deficit is expected to grow this year too, materials maker Johnson Matthey said.
Silver rose 1% to $17.64, while platinum gained 0.2% to $963.14. (Reporting by Sumita Layek in Bengaluru; Editing by Alexander Smith, Kirsten Donovan)