Gold prices regained the upside bias after yesterday’s pause, refreshing early-February highs marginally below $1,590 on Tuesday. The bullion resumed the ascent as investor sentiment turned sour again following a warning from Apple. The US tech giant said it won’t meet its March quarter revenue expectations, citing supply constraints for iPhone and weaker demand in China amid a coronavirus outbreak. On the back of these headlines, market participants started to express concerns over corporate results of large companies for the January-March quarter in the context of the consequences from the virus spreading.
As such, risk aversion resumed and sent the yellow metal to fresh more than two-week highs, with global investors rushing for safe-assets, including gold. Also, a cautious tone in the financial markets persists as concerns over the coronavirus are still there.
The precious metal also received a boost from the economic front. As German ZEW survey showed, the economic sentiment index plunged to 8.7 in February versus 21.5 expected and 26.7 previously. The current conditions index came in at -15.7 versus -10.3 expected and -9.5 in January. Meanwhile, the Eurozone economic sentiment arrived at 10.4 versus 30.0 expected and 25.6 prior. The dismal figures fueled worries about the outlook for the European economy which at some point may need additional stimulus measures from the European Central Bank. By the way, EURUSD dipped to fresh multi-year lows around 1.0820 following the release and could threaten the 1.08 handle in the short term should the selling pressure persist.
On the other hand, demand for the greenback remains robust, which caps the upside potential in the precious metal. So, this factor may prevent the prices from breaking above the $1,590 handle in the immediate term. Anyway, gold continues to trade within a bullish channel while downside risks are limited as long as coronavirus keeps global investors on edge.
In the weekly timeframes, the bullion remains elevated but off highs above $1,600, registered in early-January. A clear break above the mentioned intermediate resistance will open the way to the psychological level if risk aversion persists in the days to come.
