James Hyerczyk
Add to Bookmarks

Gold futures are inching lower on Thursday after giving back earlier gains. After opening lower, the market reversed course to the upside in reaction to a plunge in global equity markets and Treasury yields.

Although yields and equities remain under pressure, gold has also turned lower due to a stronger U.S. Dollar. The dollar is being underpinned by a drop in the Euro ahead of the European Central Bank monetary and interest rate announcements. A stronger dollar tends to weigh on foreign demand for dollar-denominated gold.

Know where Gold is headed? Take advantage now with 

Trading Derivatives carries a high level of risk to your capital and you should only trade with money you can afford to lose. Trading Derivatives may not be suitable for all investors, so please ensure that you fully understand the risks involved, and seek independent advice if necessary. A Product Disclosure Statement (PDS) can be obtained either from this website or on request from our offices and should be considered before entering into a transaction with us. Raw Spread accounts offer spreads from 0.0 pips with a commission charge of USD $3.50 per 100k traded. Standard account offer spreads from 1 pips with no additional commission charges. Spreads on CFD indices start at 0.4 points. The information on this site is not directed at residents in any country or jurisdiction where such distribution or use would be contrary to local law or regulation.

At 11:22 GMT, April Comex gold is trading $1638.60, down $3.70 or -0.23%.

Bullish Influences

The catalyst behind any strength in the gold market will be worries about the economic impact of the coronavirus. Shortly after the futures market opening, gold rallied after the United States suspended travel from virus-hit Europe. The travel ban drove stocks sharply lower as well as Treasury yields, the moves triggers a small spike in gold prices.

The travel ban “is a big surprise and a big shock to the market” and shows that investors are yet to see the full financial fallout from the coronavirus outbreak, said IG Markets analyst Kyle Rodda.


Bearish Influences

The rally in gold was short-lived because investors once again sold gold to raise cash to meet margin calls in the stock market.

Gold is also being pressured by a stronger U.S. Dollar Index, which is being supported by a weaker Euro. The single-currency is losing ground in reaction to Trump announcement of a ban on travelers from 26 European countries entering the United States for a month.

Investors are also waiting to see how aggressively the European Central Bank (EC B) acts at its meeting later on Thursday.

Traders expect a cut to the main deposit rate by 10 basis points. But it is no certainty since rates are already at a record low of -0.5% and further cuts could hurt bank margins and so squeeze lending.

A press conference is due at 1230 GMT in Frankfurt, after the monetary policy meeting.

Daily Forecast

Based on the early price action, gold could weaken further if the ECB decides to act aggressively and trim rates further. This move would drive the Euro lower and the dollar index higher. This would put further pressure on demand for dollar-denominated gold.

Stock index futures are limit down. If the selling pressure continues then look for gold to drop further since this would encourage investors to sell gold to meet stock market margin calls.

Don't miss a thing!
Discover what's moving the markets. Sign up for a daily update delivered to your inbox

Trade With A Regulated Broker