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James Hyerczyk

Gold futures are trading lower on Friday, confounding the gold bugs and brokers, who tell you to buy the precious metal during times of uncertainty. Despite the fear of a deadly virus in China becoming a global emergency, gold futures are trading slightly lower for the week.

Buying may pick up over the weekend or next week, if conditions worsen and investors have no other places to take protection, but at this time, the safe-havens of choice are U.S. Treasurys, the Japanese Yen and the Almighty U.S. Dollar.

At 13:31 GMT, April Comex gold is trading $1564.20, down $7.40 or -0.45%.

World Health Organization Tempers Fears

If you need a reason why gold is being pressured then the best story is the World Health Organization’s (WHO) tempering of fears of a global coronavirus outbreak.

On Thursday, the WHO addressed the coronavirus outbreak saying it was a “bit too early to consider this event is a public health emergency of international concern.”

“Make no mistake, this is, though, an emergency in China. But, it has not yet become a global health emergency. It may yet become one,” said Tedros Adhanom Ghebreyesus, director-general of the WHO. He added the organization’s assessment is that “the outbreak is very high-risk in China, and high-risk regionally and globally.”

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European Central Bank Launches Major Policy Review

The Euro and German bund yields sank on Thursday after ECB President Christine Lagarde struck a slightly more dovish tone than markets were expecting in a press conference, after the ECB left monetary policy unchanged at its first meeting of 2020.

The ECB launched a broad review of its policy, seeking to redefine its main goal and how to achieve it, as years of the central bank’s experiment with negative interest rates and quantitative easing have failed to deliver targeted inflation levels.

ECB President Christine Lagarde told a news conference that risks to growth in the Euro Zone remained tilted to the downside and traders took her overall tone as dovish.

The steep plunge in the Euro boosted the U.S. Dollar Index, making dollar-denominated gold a less-attractive asset.

Daily Forecast

With over 30 million people quarantined in China and 10 cities on lockdown, the Chinese economy may come to a standstill over the short-run. This includes those who were likely to purchase gold during the Lunar New Year holiday.

Gold could continue to trade sideways-to-lower over the near-term, but we could see a spike to the upside if the virus spreads exponentially internationally.

Additionally, it is hard to build a case for a bullish breakout to the upside in gold with global equity markets hovering near record highs. This week’s price action suggests stocks may have to plunge 1, 2 or even 5 percent to get the gold market moving to the upside.

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