Price of Gold Fundamental Daily Forecast – Prices Tumble Amid Mixed Reaction to Coronavirus Scare

The “sluggish” forecast from the IMF likely means that central banks will keep interest rates at or near historically low levels. Furthermore, it opens the door to more creative central bank stimulus like Quantitative Easing (QE) and fresh fiscal stimulus. This could provide support for gold throughout the year.
James Hyerczyk

Gold futures are trading lower shortly before the regular session opening after giving back earlier gains that took the market to its highest level since January 8. Gold rallied earlier in the session as demand for risky assets plunged amid fears of contagion of the coronavirus in China. The market retreated from its high after safe-haven Treasurys and Japanese Yen gave back their gains and U.S. equity markets bounced off their lows.

At 12:44 GMT, February Comex gold is trading $1556.50, down $3.80 or -0.24%. The high of the session is $1568.80.

Coronavirus Outbreak Concerns

Risky assets fell and safe-haven assets rose earlier in the session after a coronavirus outbreak that began in the central Chinese city of Wuhan raised fears of contagion. Investors were also rattled by the news that the World Health Organization (WHO) called a meeting for Wednesday to consider declaring an international health emergency.

The contagion fear was fueled by worries the virus would spread during the Chinese Lunar New Year celebration, which begins this weekend.

“Chinese New Year holidays are going to worsen the situation as people are bound to travel in China. The fear of outbreak is going to drive up demand for gold for a couple more days,” said Margaret Yang Yan, a market analyst at CMC Markets.

Price Action Suggests Trader Overreaction

The bullish view is not shared by everyone, however.

“The virus is like a double-edged sword,” said Quantitative Commodity Research consultant Peter Fertig.

“In one way it is boosting gold, but in the longer term, if the virus kills thousands that will impact gold negatively on the physical side,” Fertig said, adding a stronger dollar is weighing on gold prices at the moment.

Additionally, Jeffrey Halley, senior market analyst at OANDA, aid in a note, “However, it is hard to see gold progressing above $1,600 an ounce until the health emergency escalates sharply and becomes a regional problem.”

IMF Forecasts Supportive for Gold

Global economic growth for this year has been revised downwards from 3.4% to 3.3%, according to the International Monetary Fund (IMF). The IMF has become less optimistic about global growth, warning that the outlook remains sluggish and there are no clear signs of a turning point.

The “sluggish” forecast likely means that central banks will keep interest rates at or near historically low levels. Furthermore, it opens the door to more creative central bank stimulus like Quantitative Easing (QE) and fresh fiscal stimulus. This could provide support for gold throughout the year.

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

Latest Articles

See All

Expand Your Knowledge

See All
The content provided on the website includes general news and publications, our personal analysis and opinions, and contents provided by third parties, which are intended for educational and research purposes only. It does not constitute, and should not be read as, any recommendation or advice to take any action whatsoever, including to make any investment or buy any product. When making any financial decision, you should perform your own due diligence checks, apply your own discretion and consult your competent advisors. The content of the website is not personally directed to you, and we does not take into account your financial situation or needs.The information contained in this website is not necessarily provided in real-time nor is it necessarily accurate. Prices provided herein may be provided by market makers and not by exchanges.Any trading or other financial decision you make shall be at your full responsibility, and you must not rely on any information provided through the website. FX Empire does not provide any warranty regarding any of the information contained in the website, and shall bear no responsibility for any trading losses you might incur as a result of using any information contained in the website.The website may include advertisements and other promotional contents, and FX Empire may receive compensation from third parties in connection with the content. FX Empire does not endorse any third party or recommends using any third party's services, and does not assume responsibility for your use of any such third party's website or services.FX Empire and its employees, officers, subsidiaries and associates, are not liable nor shall they be held liable for any loss or damage resulting from your use of the website or reliance on the information provided on this website.
This website includes information about cryptocurrencies, contracts for difference (CFDs) and other financial instruments, and about brokers, exchanges and other entities trading in such instruments. Both cryptocurrencies and CFDs are complex instruments and come with a high risk of losing money. You should carefully consider whether you understand how these instruments work and whether you can afford to take the high risk of losing your money.FX Empire encourages you to perform your own research before making any investment decision, and to avoid investing in any financial instrument which you do not fully understand how it works and what are the risks involved.