The XAUUSD pair started the new trading week with a bullish gap. Gold jumped from the $1657 levels and leapt to the $1690 area amid sour market mood and persistent coronavirus fears.
On Monday in the Asia trading, the risk-off theme was in full swing. The number of new coronavirus cases both in mainland China and in Hubei province decreased – China’s National Health Commission’s (NHC) reported 409 new patients as of Feb 23 versus 648 on Feb 22 while in Hubei there were 398 people infected on Feb 23 versus 630 on Feb 22.
However, the epidemic started spreading globally. South Korea reported 161 new cases bringing the total number of sick people to 763 while in Italy the number of patients surged from three to 130 just over the weekend. Italian authorities decided to cancel the Venice Carnival two days earlier than scheduled and impose a lockdown on several towns in the northern part of the country. All this weighed on the sentiment and helped the gold to stage a solid rally.
And though the EU Commissioner Paolo Gentiloni tried to sooth markets, stressing that the EU fully relied on the Italian officials’ efforts to curb the pandemic and there was no reason for panic, that didn’t help much as the investors preferred to keep on investing to the safe-havens.
Meanwhile over the weekend, the Saudi capital Riyadh held the G20 summit where finance ministers and central bankers convened to discuss global economic issues as well as coronavirus and its impact on the economy. Most of the participants agreed that the countries needed to coordinate their efforts to fight the epidemic and highlighted the risks related to the new disease. That also affected market’s mood on the first trading day and supported the non-yielding metal. Despite the strengthening of the US Dollar across the board, which usually tends to erode demand for the dollar-denominated commodity, gold seemed to ignore this and continued its march north.
From the technical point of view, the XAUUSD pair refreshed multi-year highs in the $1685 region and kept on going up for the fifth consecutive session. It sits comfortably above its main SMAs and challenges the resistance at 1685.88. The support awaits at 1625.28, 1607 and 1594.98. Today, the US will not publish any meaningful data and thus the coronavirus news will continue to determine the sentiment. While risk-off dominates markets, the gold will likely continue its rally.