· Gold prices edged lower in volatile trade on Wednesday as a flight to cash offset growing hopes for a massive U.S. economic stimulus to stem the coronavirus outbreak's economic toll.
Spot gold fell 0.3% to $1,605.45 per ounce by 0447 GMT, after rising as much as 1.6% earlier in the day. The metal jumped more than 3% in the previous session.
U.S. gold futures climbed 0.5% to $1,668.60.
· "The recent development in gold prices has nothing to do with fundamentals, it (the metal) has de-linked from its safe-haven status... We are in unprecedented times and nothing can be justified," said CMC Markets analyst Margaret Yang Yan.
"Investor sentiment remains very fragile and cautious, and 'cash is king' is still on top of people's mind, so the volatility is likely to persist," she said, adding that there was some shortage of physical supply to fulfil the futures market's obligations.
· Benchmark spot gold prices continued to trade below U.S. gold futures in a sign that the market is worried air travel restrictions and precious metal refinery closures will hamper shipments of bullion to the United States to meet contractual requirements.
· Senior U.S. Democrats and Republicans said on Tuesday they were close to a deal on a $2 trillion stimulus package to limit the pandemic's economic toll.
"Gold has benefited from the expectation of the massive stimulus measures likely to be approved by the United States.
Investors feel gold might hold its value," said John Sharma, an economist at National Australia Bank.
However, investors were in two minds - whether to go for the safety of gold or liquidate positions to cover loses on other commodities and seek refuge in hard cash, he added.
The virus had infected more than 395,500 people across the world by Tuesday, and has forced many countries to lock down their cities to combat the spread.
· Indicating investors' appetite for gold, holdings in the world's largest gold-backed exchange-traded fund, SPDR Gold
Trust, rose 1.3% to 935.98 tonnes on Tuesday.
· Gold Price Analysis: QE unlimited boosts XAU/USD, nearing $1630/oz
XAU/USD daily chart
After suffering a sharp decline, gold is having a violent reaction up as this Monday the Fed announced that it would do whatever it takes to support the economy, aka Quantitative Easing unlimited or to infinity.
XAU/USD four-hour chart
The metal is surging from the 2020 lows as the bulls are challenging the 1630 resistance level while above the main SMAs on the four-hour chart. A break above the above-mentioned level can lead to further gains toward the 1660 and 1700 levels. Support can be expected near the 1590 and 1470 price levels.
Resistance: 1630, 1660, 1700
Support: 1590, 1570, 1540
· Among other precious metals, palladium climbed 0.1% to $1,934.50 per ounce and platinum gained 2.5% to $725.86.
Both the metals surged more than 10% in the previous session on the back of a lockdown in major producer South Africa.
Silver rose 0.3% to $14.31 per ounce.
Reference: Reuters, FX Street
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