While the gold market appears to be starting off on a softer footing we would suspect it will regain its footing at some point during the trade today. In fact, today might be a day where prices pay little if any attention to classic supply and demand fundamentals and instead look ahead to the potential virus/economic developments inside China from over the weekend.

However recent chart action has been supportive and the market has shown signs of shaking off morning weakness and clawing higher in the afternoon trades. In a sign of rising speculative bullish interest gold ETFs saw their holdings increase for the 7th straight day yesterday bringing this year's net purchases up to 1.19 million ounces. It should be noted that total gold holdings by ETFs are now at the highest levels in 12 months with gold holdings last year thought to be poised to make more new record high holdings this year.

As for the virus, situation cases continue to show up sporadically around the globe and the death toll has climbed above 200 but the markets are not concerned about the global health threat. In fact, we would suggest the containment efforts outside of China are seemingly slowing the spread to a very manageable level and the incubation/transmission window could be mostly closed one week from today. However, as we will continue to suggest the major uncertainty thrown off from the virus is what is taking place in the Chinese economy with images of major thoroughfares, train stations public spaces like shopping centers and parks completely empty.

While China released a surprisingly upbeat nonmanufacturing PMI reading for January, economists are quickly discounting that reading as a "pre-virus" reading. In short, expect choppy two-sided trade with the likelihood of a grind higher and potentially a re-test of $1594.70 with even higher prices possible if equities show increased concern and the S&P falls below 3260.00.

The biggest threat to the bull camp would be any fresh soothing commentary from World Health Organization officials regarding progress toward global containment or maybe even the slowing of the spread of the virus inside China but that is unlikely considering that the WHO provided a statement yesterday.

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Non-Reliance and Risk Disclosure: The opinions expressed here are for general information purposes only and should not be construed as trade recommendations, nor a solicitation of an offer to buy or sell any precious metals product. The material presented is based on information that we consider reliable, but we do not represent that it is accurate, complete and/or up to date, and it should not be relied on as such. Opinions expressed are current as of the time of posting and only represent the views of the author and not those of Zaner Financial Services LLC, unless otherwise expressly noted.