Price of Gold Fundamental Daily Forecast – Bullish Traders Need Help from Central Banks to Sustain Rally

Gold futures are trading lower on Wednesday as risk appetite improved after China reported its lowest number of new coronavirus cases since last January. The market is also feeling pressure after China’s foremost medical adviser on the coronavirus outbreak said the epidemic may peak this month.

Gold was also pressured by comments from Federal Reserve Chairman Jerome Powell who said on Tuesday that the U.S. central bank is unlikely to change interest rates in the near-term. With risks like trade policy uncertainty receding and global growth stabilizing, Powell signaled he saw no reason to adjust U.S. interest rates, unless new developments cause a “material reassessment” to the current outlook.

At 08:39 GMT, April Comex gold is trading $1566.70, down $3.40 or -0.22%.

RBNZ Removes Chance of Rate Cut

In another blow to gold bulls, betting on weakness in the global economy, the Reserve Bank of New Zealand (RBNZ) held rates at record lows on Wednesday, as expected, but sounded more confident on the economic outlook and dropped previous references to the chance of future cuts, sending the Kiwi soaring.

At its first meeting of the year, the RBNZ flagged new risks to the economy from the coronavirus epidemic in China but expected any impact to be limited.

While the RBNZ held rates at 1% as expected in a Reuters poll of economists, the statement omitted a line used in previous policy statements that it would add further monetary stimulus if needed. It also delivered noticeably more upbeat comments about employment and consumer prices.

The central bank also raised the forecast path for rates this year to 1%, from 0.9% previously, removing the chance of a cut.

Fed’s Powell Says Economy in Good Place, Warns on Coronavirus

Federal Reserve Chair Jerome Powell told Congress on Tuesday that the U.S. economy is in a good place, even as he cited the potential threat from the coronavirus in China and concerns about the economy’s long-term health.

With risks like trade policy uncertainty receding and global growth stabilizing, “we find the U.S. economy in a very good place, performing well,” Powell told the U.S. House of Representatives Financial Services Committee. The U.S. economic expansion, now in its 11^th year, is the longest on record.

“There is no reason why the expansion can’t continue,” he said, repeating the central bank’s view that its current target range for short-term borrowing costs, between 1.50% and 1.75%, is “appropriate” to keep the expansion on track.

Chinese Officials Think Deadly Coronavirus Epidemic Could Be Contained by April

China’s foremost medical adviser on the coronavirus outbreak, Zhong Nanshan, said on Tuesday numbers of new cases were falling in some provinces and forecast the epidemic would peak this month.

“I hope this outbreak or this event may be over in something like April,” Zhong, and epidemiologist whose previous forecast of an earlier peak turned out to be premature, told Reuters.

Daily Forecast

It’s not the coronavirus driving gold prices, it’s the probability of a recession that is moving prices. Worsening coronavirus conditions will slow down economic growth in China. This will eventually spread to the global economy. If that happens then the chances of a global recession will increase, central banks will be encouraged to make moves that could drive gold price higher.

However, we’re not quite there yet, if you believe the news. Although analysts are indicating a weaker economy in China, they aren’t ready to introduce the “R” word, so until they do, gold is going to have a hard time sustaining any rally.

Fed Chairman Powell talked up the U.S. economy. RBNZ Governor Orr sounded confident that the New Zealand economy was on the path to recovery. Powell said rates would remain steady, and Orr reduced the chances of a rate cut this year.

The variable remains the economic impact of the coronavirus and both central bank leaders suggested they still need more time to determine if there is a major problem. Gold is going to have a hard time rallying as long as the central banker’s don’t feel a threat from the virus.