Gold retreated on Tuesday, retracing much of the coronavirus inspired gains seen over the previous two sessions. While the cases of coronavirus continue to climb, the number of confirmed cases outside of mainland China has remained relatively limited.

The number of confirmed cases now stands at 4,690. That's up considerably from the 2,886 cases reported yesterday. However, only 80 confirmed cases have been reported outside of the PRC. That number continues to rise, but the indication that the virus has been largely contained to mainland China has revived the market's appetite for risk.

While U.S. health officials have reportedly fast-tracked a vaccine, it may still be a number of months before it's ready for clinical trials. Nonetheless, the market may have garnered some optimism from that news, allowing the focus to shift back to generally upbeat earnings reports.

Gold is likely to continue fluctuating in the short-term based on the level of concern about the Wuhan coronavirus. However, the underlying trend is still seen as positive, despite the lower closes seen over the last two sessions.

According to Wood Mackenzie, a research and consultancy firm with expertise in the natural resource space, gold is poised to perform strongly in 2020, with geopolitical risk set to remain elevated.

"The volatility of 2019 provides us with a good gauge as to how the gold price could respond to a more significant de-escalation in the trade war. What we can be sure of is that any further trade talks will likely be shrouded in uncertainty, with gold set to fluctuate accordingly." – Rory Townsend, Wood Mackenzie Head of Gold

I'm inclined to agree. As discussions between the U.S. and China move on to a Phase 2 deal, the negotiations are likely to be every bit as contentious as those that ultimately led to the Phase 1 deal.

Silver shrugged off recent safe-haven buying, succumbing instead to the global growth risks that are pressuring the broader commodities complex. The white metal tumbled more than 3% on Tuesday, taking out nearby supports to set a 4-week low.

Spot Silver Daily Chart

Spot Silver Daily Chart

Silver appears poised to close below the 100-day SMA at 17.90 and the 50-day is close at hand as well (17.47). The 61.8% retracement level of the rally from the early-December low at 16.52 to the early-January high at 18.86 comes in at 17.41.

Platinum and palladium remained under corrective pressure as well amid virus-driven demand concerns. Rhodium remains resilient and is "trading to illiquidity, not to fundamentals..." according to a London trader.

The Johnson Matthey base price for Rh has been locked at an 11-year high of $9,985 for nearly a week, just below the all-time high base price of $10,100 from June of 2008.

On Wednesday, the Fed's 2-day FOMC meeting wraps up. Policy is expected to remain steady as the "dovish pause" continues. The market will be looking for any indication of potential further accommodations in light of mounting growth risks.


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