The direction of the gold market continues to be fickle as sentiment in the market has waffled between deflationary/physical demand fear selling and classic safe-haven buying. In other words in the event the virus crisis is generally under control and continues to put the brakes on the Chinese economy, the trade fears a serious cut back in Chinese gold jewelry/physical purchases.

Fortunately for the gold bulls, China overnight announced a 50% tariff reduction on US imports and that might be seen as another move to underpin their economy. However, another contingent in the marketplace thinks the virus is pushing several global central banks toward fresh easing, which would ultimately benefit gold.

Overnight gold prices in India remained under pressure for the 3rd straight day, with buyers remaining ultra-price sensitive and perhaps a little leery of making purchases in the face of the recent massive decline in Indian gold demand figures.

Gold ETF holdings yesterday increased for the 11th straight day bringing this year's net purchases to 1.54 million ounces.

While we respect the market's capacity to bounce from what appears to be credible chart support at $1550 the threat of plummeting Chinese physical demand might require a dramatic worsening of the virus threat to fully rekindle safe-haven buying and launch prices back up to the $1600 level.

On the other hand, we detect a slight building of speculative fatigue in gold off the virus storyline and that might be confirmed by the steady decline in trading volume and open interest over the past 2 weeks.

An added pressure on gold is another upside breakout in the dollar which has risen above its 200-day moving average in a fashion that seems to point to a "trend".

Using a trading range style short term strategy might allow for April gold to claw back to the middle of the consolidation up at $1576. In the end, we think the longs have more risk than the shorts and we would suggest that longs bank profits and reverse positions before the Friday morning payroll release.

We invite you to subscribe to receive our more comprehensive market update delivered directly to your inbox.


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.