· Gold inched up on Thursday on worries about the economic impact of the coronavirus outbreak as the United States suspended travel from virus-hit Europe, although gains were capped as traders covered margin calls after a plunge in equities.
Spot gold was up 0.1% at $1,636.37 per ounce by 0415 GMT, having risen as much as 0.9% earlier in the session.
U.S. gold futures fell 0.4% to $1,636.30.
· The travel ban "is a big surprise and a big shock to the market" and shows that investors are yet to see the full financial fallout from the coronavirus outbreak, said IG Markets analyst Kyle Rodda.
On the flip side, traders are selling gold to fund margin calls, providing a headwind for the metal, Rodda added.
· U.S. President Donald Trump on Wednesday announced the suspension of all travel from Europe, except from the United Kingdom, to the United States for 30 days, leading to a sell-off in global stock markets and the dollar.
· The World Health Organization (WHO) on Wednesday described the new coronavirus as a pandemic, adding that Italy and Iran were now on the frontline of the disease - more than 119,100 people have been infected globally.
· Global central banks have taken steps to shield their economies from the impact of the outbreak, with the Bank of England being the latest to cut interest rates on Wednesday. The U.S. Federal Reserve reduced rates in an emergency move last week.
· The European Central Bank (ECB) is expected to follow suit when it holds its meeting later in the day, with the bank all but certain to unveil new stimulus measures, pushing policy closer to its limits to cope with the shock of the epidemic.
While markets have priced in a 10 basis point move, rates are already at a record-low of minus 0.5%.
The ECB stimulus measures would also be supportive for gold, Phillip Futures analysts said in a note.
Lower interest rate reduces the opportunity cost of holding non-yielding bullion.
· Gold Price Analysis: Trims gains, immediate bias bearish
Gold is currently trading at $1,637 per Oz, having hit a high of $1,650 in Asia.
The pullback is not surprising, as the technical studies are biased bearish. To start with, the daily chart shows a spinning top bearish reversal pattern - Monday's spinning top followed by a 1.8% drop on Tuesday.
Further, the yellow metal created a big red candle with a notable upper shadow (sell on the rise mentality) on Tuesday, reinforcing the short-term bearish bias. Also, the daily RSI is reporting a bearish divergence.
The odds appear stacked in favor of a drop to the 50-day average support at $1,590. The bearish case would weaken if prices find acceptance above $1,671, invalidating the lower highs setup on the hourly chart.
· Elsewhere, palladium dipped 4.7% to $2,195.68, while platinum rose 0.6% to $864.70. Silver fell 0.9% to $16.60.
Reference: Reuters, FX Street
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