Gold prices remain within a firm bullish trend, being lifted by coronavirus concerns that drive global markets lower this year. On Wednesday, the precious metal registered fresh 7-year highs above $1,600, exceeding the $1,610 figure. Today, the futures pared gains but remain close to important highs, hovering above the psychological level.
On Thursday, in another effort to support the struggling economy amid the spreading coronavirus, the People’s Bank of China cut its benchmark loan prime rate. Still, investors haven’t been impressed by the move, as the step was expected. Besides, South Korea reported 31 new cases of coronavirus, which added to a mostly negative sentiment in Asia.
Against this backdrop, despite the rate of virus spreading has been slowing in mainland China, worries about the consequences for the economy continue to unnerve global investors, which in turn prevents world stocks from a sustainable recovery from previous losses. In an unstable environment, investors tend to bet on safe-haven assets, including gold. So, despite the local correction seen today, the upside risks for the bullion continue to persist as long as the coronavirus remains in focus.
On the negative side, dollar demand remains robust nearly across the board at this stage. The FOMC meeting minutes showed the US monetary authorities assess the state and the outlook for the domestic economy fairly positive despite the central bank mentioned risk related to coronavirus. USD index stays at three year highs and may gain further should the upcoming economic data out of the United States continue to surprise to the upside.
From the technical point of view, the yellow metal needs to hold above $1,600 in the near term in order not to lose the bullish impetus and make another bullish run. In other words, the futures need to confirm a break above this level so that to refresh multi-year highs these days. Should the local bearish correction continue in the near term, the immediate support comes around $1,590 in case the prices get back below $1,600.