· Gold prices climbed more than 2% on Monday to their highest since February 2013, as spikes in coronavirus cases in several countries outside China deepened worries about a hit to the global economic growth, prompting a flight to safe havens.
Spot gold was up 1.6% at $1,669.80 per ounce by 0713 GMT, after climbing to $1,678.58 earlier in the session. U.S. gold futures rose 1.5% to $1,672.80.
· “The thinking is that fewer people are holding shares, selling down in particular, and that money has to fall into havens,” said Michael McCarthy, chief market strategist at CMC Market.
“The impact on the global economy also means we will likely see a lower interest rate environment for longer.”
Lower interest rates reduce the opportunity cost of holding non-yielding bullion.
· Global equities extended losses as concerns about the spread of the virus beyond China grew with sharp rises in infections in Italy and Iran, while South Korea raised its infectious disease alert to its highest level.
· The World Health Organization said it is worried about the growing number of cases without any clear link to China.
· “Gold has finally established some serious momentum, and more negative coronavirus headlines will see a test of $1,700 an ounce on (safe-)haven flows, sooner rather than later,” Jeffrey Halley, senior market analyst at OANDA, said in a note.
· Among other safe havens, the U.S. dollar edged higher, while the benchmark U.S. 10-year Treasury yield fell to its lowest since July 2016.
The Japanese yen further backed away from its lowest since April 2019 against the U.S. currency.
· Apart from speculative positioning, financial uncertainty and low interest rates are also bolstering demand for gold, Phillip Futures analysts said in a note.
· Speculators raised their bullish positions on COMEX gold and silver contracts in the week to Feb. 18, the U.S. Commodity Futures Trading Commission (CFTC) said on Friday.
· Among other precious metals, palladium was flat at $2,703.31 per ounce. Silver rose 1.4% to $18.71 an ounce, while platinum fell 0.4% to $969.41.
· Gold Price Analysis: Better bid after biggest weekly gain since August 2019
Gold is on the offensive, having logged its biggest weekly gain in six months last week.
The yellow metal is currently trading at $1,663 per Oz, representing over 1% gains on the day, having hit a high of $1,681 in early Asia. That was the highest level since February 2013.
Prices rallied by over 3.7% last week. Gain bigger than that were last seen in the second week of August.
Overbought?
The daily relative strength index (RSI) is reporting overbought conditions with an above-70 print. The weekly RSI is also echoing similar sentiments.
The price chart, however, is showing no signs of buyer exhaustion. So, the path of least resistance remains to the higher side.
The pullback from the session high of $1,681 looks to have run out of steam near $1,658. The dip could attract more bids as the risk-off is in full swing with the futures on the S&P 500 and the Asian equity indices reporting notable losses on the emergence of coronavirus infections in new countries including South Korea, Italy, and Iran.
· Trading View | Gold’s weekly outlook: Feb 24-28
Gold surged to fresh 52 week high in a big green week just shy of $1650 on back of a weaker dollar and the persisting coronavirus tensions. The price had a one way rally after the pattern was broken on the upside clearly indicating the market sentiment. The coronavirus issue, which in China has likely peaked out but has started a fresh crisis globally again which should keep the gold prices afloat and bears out. Gold is getting stronger on the technical front as another breakout has likely happened. To watch this week – G20 outcomes and other important economic data.
Gold made a new 52 week high as it gained $60 in second biggest week of 2020. The gains were driven largely by a weakening dollar with fresh virus issue adding fire to the fuel. Technicals continue to support higher prices even after such a rise as there is likely a breakout again. We have 2 scenarios –
1. Gold closed above the support, till this is held it can go to $1658. If this is crossed it can move towards $1672. And if this is taken out it can rally to $1685.
2. Short trades remain in exile as trend remains bullish .
Bullish view – Bulls had a thumping week as they registered a fresh 52 week high and conquered $1600 after nearly 7 years. The bullishness was mainly due to a soft dollar and a result of the pattern breakout which it had last week. Again there is likely a breakout on weekly timeframe which is extremely bullish so technicals remain strongly in favor of bulls while fundamentals continue to drag on. For the price to keep going higher it needs to defend the supports/lows.
Bearishness remains off the table.
On larger terms, Gold continues to remain bullish and prices are expected to head higher.
Possible trades are on both sides but mainly on upside, gold can be bought above $1650 for the targets of $1658 and $1672 with a stop loss placed below $1637. Longer term target $1685.
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.
Reference: Reuters , FX Street, Kitco
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