The prices of gold did not change much on Monday but remained close to its two-week high because of the uncertainty over the global economic impact of the coronavirus outbreak in China.
U.S. gold futures remain unchanged at $1,585.31 an ounce. Spot gold prices, which reached its highest price of $1, 584.64 per ounce last Friday, barely moved at $1,582.83 an ounce as of 0453 GMT.
The U.S. dollar hit its highest valuation in almost four weeks while the Asian stock market bounced back to a three-week high after the Chinese government injected liquidity into markets to alleviate the impact of the epidemic. Both had minimal effect on gold prices.
According to Michael McCarthy, CMC Markets’ chief market strategist, the precious metal is able to maintain high prices because it is supported by the uncertainty on the economic impact of the 2019-nCoV epidemic. He noted that the stronger U.S. dollar does not seem to affect bullion prices at the moment. McCarthy also said that market enthusiasm is limited by the metal’s strong technical resistance price level of $1,590 per ounce.
UBS added that the outbreak is certainly going to push down the demand for physical gold in China, the world’s second-largest consumer of the yellow metal.
China’s National Health Commission reported on Sunday that the death toll from the Coronavirus epidemic has already reached 1,770. This has caused gold premiums to hit its lowest level in 19 months.
Other markets and economies are already starting to feel the effect of the outbreak. In India, the retail demand for the bullion was capped by record-high prices. In Singapore, the government has lowered its economic growth forecast for 2020. In Japan, a Reuters survey found that manufacturers are still pessimistic in February.
In the U.S., the Federal Reserve had already expressed concerns over the potential impact of the epidemic on the American economy. Loretta Mester, president of the Federal Reserve Bank of Cleveland, said the outbreak could have a spillover on the U.S. economy in the first quarter of 2020. Other Fed officials including Chairman Jerome Powell agreed with Mester, but there’s still no indication of how it would influence their stance on monetary policy and interest rates.
Meanwhile, data shows that market speculators have raised their bullish stance on COMEX gold for the week which ended on February 11, 2020.
(Contributed by Jignesh Davda)
Gold prices have been range bound since the escalation between the US and Iran earlier in the year. Near-term upside resistance is found at $1588 which held the yellow metal lower late last month.
To the downside, strong support is seen at $1571 as a horizontal level and the lower bound of a trend channel comes into play. With a light economic calendar in the session ahead, and US banks on holiday, the yellow metal is expected to hold within a range between the two mentioned levels.