Gold prices rose on Monday despite investor sentiment has improved somewhat at the start of the day. The precious metal has partially recovered from lows registered on Friday, when the prices declined dramatically amid profit taking. After the initial recovery in demand for risky assets, stocks came under pressure again. St the same time, the bullion trimmed intraday gains as well.
The coronavirus theme remains in market focus, with the potential consequences for the global economy continue to weigh investor sentiment. The timid recovery attempts have stalled at the start of a new trading week, following the reports of a pickup in the rate of virus spreading. By the way, the first case was confirmed in London while the total number of infection in Iran rose exceeded 1,500 with 66 fatalities on Monday. Against this backdrop, the Organisation for Economic Co-Operation and Development has lowered its global economic growth forecast for 2020 to 2.4% from the November estimate of 2.9%, citing the coronavirus outbreak. The growth forecast for G20 was revised lower from 3.2% to 2.7%. As the outlook for the global economy is becoming more and more cloudy, investors will likely continue to buy safe-haven assets, including gold.
Another bullish driver for gold is a weaker dollar amid the rising odds of a rate cut by the Federal Reserve. Moreover, traders started to build up expectations of stimulus measures during the upcoming meeting in March, which is dollar-negative. Despite the central bank is unlikely to cut rates this month, the fact that market sentiment shifts towards easing suggests the greenback may come under a more intense pressure in the next couple of weeks.
From the technical point of view, a wider picture for the yellow metal remains positive despite the recent retreat from highs, with upside risks persist as long as the prices stay above $1,550. Should the bullion get below this level, the next support will arrive at the 200-DMA around $1,522. On the upside, the immediate target comes at $1,610.
