Gold Prices Slide Again As Coronavirus Prompts Cash Raising

Gold and Crude Oil Talking Points:

• Gold prices slid again as some investors switched to cash
• The coronavirus’ spread will probably keep such counter-cyclical assets underpinned
• Crude oil prices made modest gains but remain pressured

Gold prices were lower again on Wednesday even as the coronavirus’ spread continued to dominate the news cycle. Investors reportedly sold gold holdings to cover cash losses incurred elsewhere, especially in the equity market rout of the past month, as they’ve been seen doing before.

Stock prices rose in parts of the Asia Pacific region, notably in Japan and Australia, as investors hoped for a continuing fiscal response from the world’s governments even as monetary policy looks stretched thanks to years of low intertest rates in many jurisdictions. New Zealand’s government added to these hopes on Tuesday with the announcement of a large package of measures to try and ameliorate some of the virus’ effects.

Still, global equity markets remain close to multi-year lows in most developed economies, adding credence to investors’ broad need for cash which some are clearly satisfying in the gold market.

The coming global session will bring news of US retail sales’ performance and UK employment levels but, as the numbers cover only January and February, they’re likely to have been rendered more historic than usual for the markets by the disease’s subsequent ravages.

Crude oil prices were higher on Tuesday, riding modestly improved risk appetite higher, and perhaps aided a little by last week’s US decision to add considerably to its strategic reserve.

However, the market still appears oversupplied and dominated by the price war between major producers Russia and Saudi Arabia which followed on from their inability to reach agreement on production cuts at this month’s meeting of the Organization of Petroleum Exporting Countries and others.

The coronavirus has clearly put the brakes on all aspects of the global economy which will in turn inevitably mean lower energy demand.

Gold Technical Analysis

Prices have collapsed this month and have now fallen below their previous trading band, which formed support on the way up to this month’s peaks. Tuesday’s retreat has taken them below $1509.68 which is the final, 78.6% retracement of the rise from November’s lows to this year’s peaks. Monday’s intraday action saw complete retracement with its trial of $1449.16, a level which now forms near-term support.

Crude Oil Technical Analysis

US crude oil prices have been sliding all year but have spent the past week or so in a broad range between $30 and $35 per barrel. However, the market seems to be headed lower within this band, with a trial of its lower range likely this week.

Commodity Trading Resources

— Written by David Cottle, DailyFX Research

Follow David on Twitter@DavidCottleFX or use the Comments section below to get in touch!