· Gold prices fell on Tuesday as investors booked profits from a jump to a seven-year high in the previous session and as equities regained some footing, but a spike in coronavirus cases outside of China capped bullion’s losses.
Spot gold was down 0.7% at $1,648.36 per ounce as of 0605 GMT. On Monday, the metal rose as much as 2.8% to $1,688.66, its highest since January 2013.
U.S. gold futures fell 1.6% to $1,650.60.
· “S&P futures jumped and regional stock markets opened higher, so we saw a temporary bout of selling pressure come through on gold,” said Jeffrey Halley, senior market analyst at OANDA.
“Now, we’re seeing bargain hunters come in to buy gold. There are increasing concerns that the virus is becoming a global issue now rather than being contained in China.”
Asian share markets found some stability after a wave of early selling petered out and Wall Street futures managed a solid bounce.
However, the coronavirus death toll climbed to seven in Italy on Monday, while several Middle East countries were dealing with their first infections.
· If central banks react to the global spread by cutting interest rates or through further monetary easing, gold will benefit, ING analyst Warren Patterson said.
While a rising dollar, which has also seen strong interest as a safe haven amid the outbreak, could temper gold’s rally, it is unlikely to “hold it back too much”, Patterson added.
The rapid spread of the virus beyond China has heightened fears over its impact on the global economy, driving some bets that the U.S. Federal Reserve will be pressed to cut rates to cushion the hit.
Lower interest rates reduce the opportunity cost of holding non-yielding bullion.
· U.S. Treasury Secretary Steven Mnuchin, meanwhile, told Reuters he does not expect the outbreak to have a material impact on the Phase 1 trade deal with China, although that could change as more data becomes available.
However, the Trump administration is considering asking lawmakers for emergency funding to ramp up its response to the epidemic.
· On the technical front, gold may retest a support at $1,639 per ounce, according to Reuters analyst Wang Tao.
· FX Street : Gold prices consolidate gains to sub-$1,650 area amid risk reset
Gold prices decline to $1,649.50, down 0.62%, amid the initial hours of the Asian session on Tuesday. While the risk of spreading coronavirus outside China propelled the bullion to a fresh seven-year high on Monday, the recently mixed headlines seem to trigger the pullback amid risk reset.
Investors will now pay close attention to the coronavirus updates for fresh impulse while the Asian traders’ reaction, led-by Japan, to the recent risk reset will also be the key.
Technical Analysis
Unless rising back beyond $1690, gold prices are expected to test the resistance-turned-support line stretched from September 2019, at $1,633 now.
· Gold Price Analysis: Resistance-turned-support trendline keeps $1,700 on the cards
Gold recovers most of the early-day losses while trading around $1,658, -0.10%, while heading into the European session on Tuesday. Even so, it needs to cross Monday’s high for the fresh rise.
If the yellow metal manages to ignore overbought RSI conditions beyond $1,690, the high of 2013 near $1696 as well as $1,700 will be on the bulls’ radar.
It should, however, be noted that the commodity’s rise past-$1,700 can take aim at highs marked during November and October 2012, respectively near $1,751 and $1,794.
Alternatively, the metal’s declines below the stated resistance-turned-support, at $1,633 now, can recall March 2013 top near $1,617 and $1,600 mark ahead of pushing the bears to 21-day SMA near $1,590.
· Among other precious metals, palladium gained 0.3% to $2,637.25 per ounce.
Silver slipped 0.7% to $18.50 an ounce, having touched its highest since early September on Monday, while platinum was steady at $963.52.
Reference: Reuters , FX Street
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