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Gold: Extends recovery gains beyond $1,562 as risk-off prevails

  • Gold remains positive for the second day in a row.
  • Fears emanating from China’s coronavirus, trade wars and US President Trump’s impeachment hearing please the bullion buyers.
  • Today’s Aussie jobs data, ECB will be the key calendar data/events.

Gold stays on the front foot while taking the bids to $1,562, +0.22%, during Thursday’s Asian session. The yellow metal has recently benefited from the fears of China’s new respiratory virus outbreak as well as the likely trade war between the US and the European Union (EU). Also contributing to the safe-haven’s strength are the events like US President Donald Trump’s impeachment hearings, uncertainty surrounding the US-China trade future and harsh Brexit fears.

The outbreak of humanly transmitted virus from China’s Wuhan city barely avoided being an international emergency as the World Health Organization (WHO) postponed its verdict on the issue to Thursday. Chinese authorities are well in line to tame the disease from spreading and have dumped preparations for the upcoming Lunar New Year celebrations.

A recent headline from China’s Global Times suggests that the longer-term tech rivalry between the US and China is expected to remain despite the latest signing up of the phase-one deal. The US Trade Representative (USTR) recently announced that tariff reduction in China phase one to take effect on February 14. Even so, the US Treasury Secretary Steve Mnuchin said, “the US couldn’t be more pleased with China deal.” It was also known that there isn’t any timeline to begin the phase-two deal talks between the US and Chinese diplomats. This suggests the uncertainty surrounding future trade relations between the world’s two largest economies.

Also on the trade front, US President Donald Trump threatened to levy 25% tariffs on the EU cars if it fails to deliver any deals. The EU Chief Von Der Leyen may visit Washington in early February, as per the EU Head Of Delegation’s latest update.

Elsewhere, President Trump’s impeachment hearings are on and the republicans are doing all they can to restore reputations of their leader. Furthermore, the EU-UK tussle on Brexit also contributes to the market’s risk aversion.

While portraying the risk aversion, the US 10-year treasury yields extend the previous declines to 1.76% whereas the S&P 500 Futures also remain sluggish around 3,317.

Looking forward, traders will keep eyes on the trade/political headlines for fresh impulse while also following details of the ECB and the Aussie data/event for clarification.

Technical Analysis

Sustained trading beyond $1,572 becomes necessary for the bulls to aim for the early-month top surrounding $1,611, failure to do so can fetch prices to a monthly low near $1,517 if 21-day SMA, at $1,545.90, fails to limit the declines.


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