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· Gold prices rose to a two-week high on Tuesday as the spread of a new virus in China stoked fears of a wider epidemic, sparking a sudden bout of risk aversion and sell-off in Asian stocks.

Spot gold prices touched their highest since Jan. 8 at $1,568.35 and were up 0.3% at $1,565.63 per ounce by 0604 GMT. U.S. gold futures were 0.4% higher at $1,566.20.

Asian shares slipped as the new coronavirus has spread to more Chinese cities and concerns mounted it could spread further with many travelling for the Lunar New Year holidays.

· Gold prices were driven by “the rapid spread of the virus from Wuhan, China, which has caused panic”, said Margaret Yang Yan, a market analyst at CMC Markets.

“Chinese New Year holidays are going to worsen the situation as people are bound to travel in China. The fear of outbreak is going to drive up demand for gold for a couple more days,” she added.

China will start celebrating the Lunar New Year this weekend.

· The yen also gained on concerns of a wider outbreak, which has prompted the World Health Organisation to convene an emergency meeting to assess the situation.

· “However, it is hard to see gold progressing above $1,600 an ounce until the health emergency in China escalates sharply and becomes a regional problem,” Jeffrey Halley, senior market analyst, OANDA, said in a note.

· Boosting safe-haven bids further, three Katyusha rockets fell inside Baghdad’s Green Zone which houses government buildings and foreign missions, and the International Monetary Fund on Monday trimmed its global growth forecasts for 2020 and 2021.

Bullion is considered a safe asset during times of financial and geopolitical uncertainty.

· Meanwhile, the Bank of Japan kept monetary policy steady and nudged up its economic growth forecasts, as the government’s spending package and receding pessimism over the global outlook take some pressure off the central bank to top up stimulus.

· Markets also kept a tab on developments in the World Economic Forum in Davos and awaited the European Central Bank’s first policy meeting of the year this week.

· Gold Price Analysis: Violates key hurdle to hit 9-day high

Gold crossed key Fibonacci hurdle a few minutes before press time and hit a nine-day high of $1,568 per Oz.

The metal picked up a bid near $1,560 and jumped above $1,564 - the 38.2% Fibonacci retracement of the pullback from $1,611 to $1,536.

If gold manages to establish a strong foothold above $1,564, the focus would shift to the next resistance lined up at $1,573 (50% Fibonacci retracement) and $1,580.

On the downside. a break below the ascending trendline drawn from Jan.14 and Jan. 17 lows is the level to beat for the bears. As of writing, the trendline support is located at $1,558.

Risk is being sold in Asia reportedly due to China's coronavirus outbreak. The flu that began in Wuhan, China, has spread to more than 200 people in what is just “the tip of the iceberg,” according to a Boston-area infectious disease doctor.

· Trading View | Gold’s weekly outlook: (Jan 20-24)

Gold consolidated with minor cuts of $4 after making 3 large candles closing above its previous 52 week high again keeping the overall trend intact. Price saw a u-turn from sub $1540s level again signalling a possible near term bottom/key demand zone as dollar remained weak. With next big fundamental event being on the radar – Impeachment of the U.S President, its highly unlikely the metal will negate the uptrend while fresh highs should definitely loom large keeping the bears in a limbo. Fundamentals look really strong for an upside in metal now whilst technicals still drag along which may lead to more consolidation before a fresh burst on the upside. To watch this week – World Economic Forum in Davos and other important economic data.

On the chart –

Gold had a subdued week after a mega 100 point rally owing to lowered geopolitical tensions/risks and a possible time correction. But the story remains intact with uptrend continuing as the metal had a positive closing again above its previous 52 week high along with fundamentals showing strong support for bulls and technicals pointing in any other direction except south. We have 2 scenarios –

1. Gold closed above the support, till this is held it can go to $1571. If this is crossed it can move towards $1581. And if this is taken out it can rally to $1597.

2. Short trades still doesn’t entice as trend remains bullish except scalp trades.

Possible trades are on both sides but mainly on upside, gold can be bought above $1564 for the targets of $1571 and $1581 with a stop loss placed below $1554. Longer term target $1597.

Dips towards support (and breakout region) can be used to create longs for the above mentioned targets.

Shorts can be useful for scalp trades only.

· Palladium advanced 0.7% to $2,516.86 an ounce. The auto-catalyst metal hit a record high of $2,582.19 in the previous session.

Silver edged higher by 0.1% to $18.08 per ounce, while platinum rose 0.2% to $1,017.91.