Price of Gold Fundamental Daily Forecast – Pressured by Rising Demand for Global Equities

Gold prices are trading lower on Tuesday shortly before the regular session opening on lower demand for protection against a steep stock market sell-off. Rising stock markets in Asia, Europe and the United States are encouraging hedgers to dump recent purchases of gold bought as protection.

Rising U.S. Treasury yields are helping to make the U.S. Dollar a more attractive asset, pressuring demand for dollar-denominated gold.

At 12:12 GMT, April Comex gold is trading $1573.50, down $8.90 or -0.56%.

One analyst cited improving sentiment and better-than-expected U.S. economic data as reasons for gold’s weakness.

“Sentiment improved as China announced measures (against the virus impact) and on positive readings in the U.S. manufacturing data. This is why we’re seeing a flight out of the safe-havens (such as gold) into riskier assets,” said Quantitative Commodity Research analyst Peter Fertig.

“In case the impact of the virus is less than the market has priced in, it could lead to a correction in gold prices, but as long as we don’t see economic growth accelerate, gold prices will remain supported,” Fertig said.

Worries over Impact of Coronavirus Dissipating

Increasing demand for higher risk assets and the shedding of safe-have assets like U.S. Treasurys and Japanese Yen are all signs that worries over the impact of the coronavirus are dissipating.

Two Chinese state media outlets on Tuesday urged investors not to panic over the plunge in mainland markets a day earlier, as concerns over the spread of a new coronavirus spooked investors.

The state-backed media Securities Times said it’s normal to see large fluctuations ins markets following major events that occur suddenly, while China Securities Journal called the market decline a “black swan” event that will not alter China’s long-term fundamentals, according to CNBC’s translation of the Chinese-language text.

The paper added that most of the negative economic impact from the virus outbreak will be felt in the first quarter. But the Chinese economy could stabilize after that with support from government, it said in the op-ed.

“Looking at the longer-term…there’s no need to overestimate the impact of black swan events – such as a sudden public health threat – on the financial markets,” it said.

Daily Forecast

Look for gold to remain under pressure on Tuesday as long as there is demand for risky assets. The early call has U.S. stocks set to continue the recovery rally following Friday’s steep sell-off.

Stocks that have been hit by fears of the coronavirus slowing the economy bounced in premarket trading Tuesday. Apple jumped 1.7% and chipmakers rallied in early trading as well. Companies directly impacted by the coronavirus, including Carnival Corp., which confirmed on Monday that a former cruise-line passenger tested positive for the virus, rose in the premarket. Carnival added 2%. Airlines bounced back as well.

On the data front, traders will get the chance to react to a report on U.S. Factory Orders at 15:00 GMT.