Gold retreated modestly on Tuesday from a two-week high overseas, weighed by mounting concern about deflationary pressures associated with the coronavirus outbreak in China. The yellow metal may also be garnering some support from the very same events on heightened risk aversion.

The Lunar New Year – frequently referred to as Chinese New Year – is this Friday and there are concerns that the Wuhan Virus will curtail people's travel plans, adversely impacting the economy. Chinese New Year is known as the world's largest human migration because a huge swath of the Chinese population travels to reunite with families for the holiday. Last year, there were nearly 3 billion trips logged in China!

The virus is also spreading and the U.S. has now recorded its first confirmed case. That patient returned from China last week and is now quarantined in a hospital in Washington state.

The impeachment trial of President Trump got underway in the Senate today. The markets don't seem to be taking much of an interest as the outcome in the Republican controlled Senate is widely believed to be pre-ordained.

Mr. Trump is in Davos Switzerland for the World Economic Forum, where he threatened once again to put tariffs on automobiles manufactured in Europe and exported to America. So while things have calmed somewhat on the Chinese trade front, things seem to be heating up between the U.S, and Europe.

Heightened trade tensions should help underpin gold and keep support marked by the 20-day SMA at 1545.84 protected. However, the inability of the yellow metal to sustain the initial overseas move to new two-week highs is disappointing.

A close below the 20-day would leave gold vulnerable to additional corrective losses to $1500 area. The post-Iran reaction low at 1535.94 from 14-Jan provides an important intervening barrier.


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