Gold edged lower within the recent range on Tuesday and appears poised to end a 4-day run of higher closes. This is well-trodden territory near the midpoint of the range that was established in early-January.

Interestingly, the dollar and gold have been pretty tightly correlated over the past week as both are being viewed as safe-havens during the coronavirus crisis. The greenback set a new 17-week high today before it too came under pressure.

While the coronavirus continues to spread in China, infections outside the PRC remain limited. Investors are finding encouragement in that reality, creating a risk-on environment, yet gold remains fairly buoyant.

Risk appetite got an additional boost from Fed Chair Powell, who told the House Financial Services Committee that the economy is in a "very good place."

"There's no reason why the expansion can't continue. There is nothing about this expansion that is unstable or unsustainable." – Fed Chair Jerome Powell

A message like that suggests the central bank is unlikely to ease any time soon, which should keep the dollar underpinned. However, that could turn on a dime if the spread of the coronavirus accelerates and/or global growth risks intensify.

That may explain why we're seeing stocks at or near record highs and gold is less than 3% off the cycle high set on January 8th at 1611.41. ETF gold holding expanded yesterday for a 14th consecutive session, suggesting investors are smartly hedging their bets with some gold.

However, Mr. Powell also warned about somethings he sees as unsustainable; namely the $23 trillion national debt and $1 trillion deficits. We touched on this topic in yesterday's post. This too is a good reason to be a gold buyer!


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