While it is difficult to project virus headlines in a straight line, the shift from concern of a delayed and more significantly troubling global outbreak has been replaced by optimism from Chinese officials regarding a possible peak in the virus "this month". Certainly, the Chinese cannot be faulted for attempting to foster calm, but to accomplish a "peak" so soon will probably require consistent daily deceleration of new cases.
While the economic damage done to the Chinese economy continues to unfold, the markets didn't seem to fully embrace that news with the market seemingly more focused on the possible slowing threat to the global economy. Therefore reports of Chinese factories reopening are undermining of gold but perhaps not cause for a wholesale washout in prices.
On the other hand, the gold market into yesterday's high had interjected nearly $30 into prices off of the escalation of virus fears from last week. Therefore it would not be surprising to see that premium removed in the coming sessions. In fact, while the dollar has retrenched from its latest new high for the move early this morning it probably remains a bearish force for gold going forward.
A development that might undermine the long term bull case in gold came from the Russian central bank overnight with the bank slowing its gold purchasing patterns and acknowledging a desire to be cognizant of the prices paid for adding reserves.
A higher close in Hong Kong gold and Reuter's reports from Harmony Gold suggesting unreliability of South African electricity and very high electric costs is an ongoing problem for their production should provide some minimal amount of support for prices today.
Another very minimally supportive development is news that gold ETFs saw their holdings increase for the 14th straight session yesterday with this year's net purchases now seen at 1.71 million ounces.
Without a reversal in equities and/or in the guardedly optimistic virus headlines from China, we see a possible slide back to $1550 in April gold.
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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.
