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Gold Prices Edge Lower But Coronavirus Fears Underpin Haven Bids

Gold and Crude Oil Talking Points:

  • Gold prices were a little lower, but their narrow range held
  • A stronger US Dollar and news of an amazing recovery for Chinese manufacturing may have weighed
  • Oil prices bounced from 18-year lows but there’s no real cheer in this market

Gold prices were a little lower in the Asia Pacific session.

Clearly the coronavirus and its spread is still running the markets’ table, and not only for precious metals, but news of an astonishing bounce back for Chinese manufacturing this month and a little more vigor for the US Dollar as month end dawns saw gold on the defensive once again.

Regional stock markets put in a mixed performance, although the bellwether Nikkei 225 and ASX 200 were both under pressure, reminding investors that risk appetite remains skittish and, probably, underscoring a strong underlying bid for haven assets such as gold.

Gold BULLISH

Data provided by

of clients are net long. of clients are net short.

Change inLongsShortsOI
Daily5%11%7%
Weekly-1%0%-1%

Risk appetite has assuredly been boosted by various massive national programs aimed at lessening the economic hit from the contagion. The crown so far of course goes to the US where a $2 trillion package got through Congress at the start of this week. However, it remains the case that even powerful stimulus plans can’t take full effect or anything like it while workforces are under lockdown, as they are in many major economies. Until restrictions are lifted it is hard to see gold prices going meaningfully lower.

This story will dominate trade for weeks to come, but the economic numbers are certainly capable of dragging attention away from it, even if only to gauge the contagion’s effects. Canadian Gross Domestic Product and US consumer confidence may do that trick in the remainder of Tuesday’s trade.

Oil – US Crude BEARISH

Data provided by

of clients are net long. of clients are net short.

Change inLongsShortsOI
Daily12%-10%9%
Weekly47%1%40%

Crude oil prices inched up from the previous day’s eighteen-year lows but there remains very little scope for cheer in this market.

The coronavirus promises a vast, unknowable hit to energy demand, on which it’s already making good as travel bans proliferate. At the same time Saudi Arabia and Russia are engaged in a price war which could yet see crude durably below $20/barrel, with some reports even suggesting that prices could go negative once storage facilities are full.

The market is also fretting about the coming glut of supply which threatens to leave those tanks expensively stacked with crude for no obvious end user.

In this light the prospect of a return to form for China’s energy-hungry manufacturing sector is certainly welcome news but it’s probably not enough in itself to push prices much higher.

Gold Technical Analysis

Gold Prices, Daily Chart

Prices remain confined to the compact trading range which has held them for a week on a daily-closing basis. Daily ranges on the other hand have narrowed quite considerably over the same period, suggesting perhaps that uncertainty is rife in the gold market.

That said, the bulls are managing to hang on reasonably close to this month’s notable highs, even if they’re clearly struggling to find any impetus to revisit them. A break below the current range base at $1608.30/ounce might set up a retreat toward March 13’s top at $1597 but the value of any range break, either way, as a directional clue may depend on an increase in the size of those daily ranges. A break accompanied by more of the current narrowness may not be conclusive.

Crude Oil Technical Analysis

Crude Oil Daily Chart

Clearly still weighed down by its own market mechanics in addition to that coronavirus hit that has clobbered so many other markets, crude oil prices uptick in response to US stimulus was woefully small.

The bulls have yet to make any significant progress towards even nearby resistance at $27.22/barrel and, indeed, the market already seems to be wilting back toward that psychologically crucial $20 point. The newly formed downtrend channel suggests that it might well get there this week.

Commodity Trading Resources

— Written by David Cottle, DailyFX Research

Follow David on Twitter@DavidCottleFX or use the Comments section below to get in touch!