Gold prices turned negative following three days of gains as risk sentiment has improved somehow. The precious metal was rejected from highs around $1,588, registered amid a widespread risk aversion at the start of the week. However, as the initial panic has abated, the safe-haven gold demand eased as well. On Tuesday, the bullion is barely holding above the $1,570 handle and turned red in the weekly charts as well. In part, this is due to a decent dollar demand after a brief pause earlier in the day, with the greenback is rising against most counterparts despite mixed US data on the durable goods orders for December.  

After a decent sell-off in Asia, European stock markets have been little changed, with US stock index futures pointing to a mildly positive open. Against this backdrop, the yellow metal struggles to regain the upside momentum. Still, the market remains broadly steady as worries about a spread of a China coronavirus continue to curb demand for high-yielding assets, with more and more countries warning against travel to the troubled China.   

Despite the current retreat, spot gold remains close to three-week highs. While the China virus theme remains in market focus, investors start to gradually shift their attention to the Federal Reserve two-day policy meeting that concludes on Wednesday. As the outcome of this risk event will likely affect the dollar dynamics, gold may see some reaction as well. The precious metal could lose some more ground should the US central bank express a more upbeat tone on the outlook for the country’s economy which in turn will affect market expectations of a rate hike. In this scenario, the bullion could challenge the $1,560 region. 

In a wider picture, gold market will likely remain strong and bullish, at least as long as the developments in China continue to unnerve global investors and fuel demand for safe-haven assets. In the weekly timeframes, the yellow metal remains steady despite the rejection from multi-year highs registered above the $1,600 earlier this month. 


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