The prices of gold today slipped as investors went into profit-taking mode to take advantage of the bullion’s seven-year high pricing during the previous session. The recovery of the stock markets also weighed on the yellow metal but losses were capped by the lingering concern about the impact of the coronavirus outbreak.
U.S. gold futures dropped by 1.6% to $1,650.60 an ounce. Spot gold prices went down by 0.7% to $1,648.36 an ounce as of 0605 GMT. During the previous session, spot prices soared to $1,688.66.
The Wall Street futures had a solid recovery today while the Asian stock markets stabilized after a series of early selling gradually diminished and stopped.
According to OANDA senior market analyst Jeffrey Halley, gold experienced a temporary selling pressure because of the rally of the S&P futures and the stronger opening of regional stock markets. But with the price decline today, he expects bargain hunters to come buying the precious metal since it is likely to make some gain soon. The 2019-nCoV epidemic has still been not contained in China and has already become a global problem.
Warren Patterson, an analyst with ING, added that the bullion’s rally is currently limited by the stronger dollar but it is not likely to be able to hold back gold for too long. He also said that gold will benefit if central banks decide to reduce interest rates to alleviate the impact of the coronavirus epidemic.
The 2019-nCoV has spread rapidly outside China. New infections were reported in several Middle East countries and the death toll in Italy has climbed to seven. This led some experts to expect the U.S. Federal Reserve to cut interest rates to minimize the impact of the virus. The Trump administration is already planning to ask the legislature to provide emergency funding to strengthen its response to the outbreak.
Meanwhile, U.S. Treasury Secretary Steven Mnuchin said that the epidemic will not have any material impact on Phase 1 of the U.S.-China trade agreement.
On the technical aspect of trading, Reuters’ analyst Wang Tao predicts gold to retest a support price level at $1,639 an ounce.