· A rally in gold prices came to a halt on Tuesday as a stronger dollar outweighed rising concerns over a new coronavirus that has fuelled demand for safe-haven assets.
Spot gold fell 0.1% to $1,579.38 per ounce by 0456 GMT, after hitting a near three-week peak on Monday. U.S. gold futures edged higher by 0.1% to $1,578.10.
· Gold prices rose for the past four sessions as the spread of the coronavirus rattled financial markets and prompted authorities to impose travel restrictions and extend the Lunar New Year holidays.
· Increasing fears about the economic impact of the new coronavirus is underpinning gold at these $1,580 an ounce levels, said John Sharma, an economist at National Australia Bank (NAB).
″(Gold) could reach $1,600, but would be more around the $1,570-$1,590 levels as we need to get more information, there are a lot of unknown variables around the virus,” he said.
· Asian shares extended a global selloff on Tuesday as the death toll from the virus reached 106 in China and some health experts questioned whether Beijing can contain the virus which has spread to more than 10 countries, including France and the United States.
Gold is considered a safe investment during times of economic and political uncertainty.
However, the bullion’s rise was halted by a firmer dollar, which hovered close to a near two-month high hit in the previous session.
· Gold looks to consolidate Monday’s gains as a number of traders are off for the Chinese New Year, pinning bullion towards $1,580, MKS PAMP analysts said in a note.
· Investors will focus on the U.S. Federal Reserve’s first meeting of the year starting on Tuesday, where it is widely expected to keep interest rates unchanged.
Lower interest rates reduce the opportunity cost of holding non-yielding bullion.
· Holdings of the world’s largest gold-backed exchange-traded fund, SPDR Gold Trust, fell 0.13% to 899.41 tonnes n Monday.
· FX Street Gold Price Analysis: Consolidating in a pennant pattern
Gold has largely been in a consolidation mode since Monday's early Asian session and is currently sidelined near $1,580.
The hourly chart shows the yellow metal is trapped in a pennant pattern. A bullish breakout would imply a continuation of the rally from the Jan. 24 low of $1,556 and would open the doors to re-test of the 2019 high of $1,611.
On the other hand, the pennant breakdown would allow a drop to the hourly chart support at $1,567.
A pennant breakout looks likely, as the daily chart is reporting bullish conditions.
· In other precious metals, palladium advanced 1.4% to $2,299.96 an ounce, after declining as much as 7% in the previous session.
Silver fell 0.2% to $18.05, while platinum rose 0.4% to $987.73.
Reference: Reuters, FX Street
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