Obviously, the virus count continues to be the predominant driving force in many markets and while the overnight virus infection tally gained 5,090 yesterday in China and there is a disturbing and growing number of medical workers catching the infection (while trying to treat patients) the markets have remained calm.

The gold trade was clearly expecting a replication and perhaps an acceleration of the startling jump in the previous day's infection count in China. Gold and silver are capped by widespread expectations for the Chinese government to unleash massive stimulus which in turn is keeping the trade from factoring in a sharp increase in economic uncertainty.

It should be noted that some traders think gold is catching its primary lift because of the massive stimulus efforts of the central banks with the safe-haven theme a secondary force.

In minimally supportive overnight developments the Indian gold jewelry industry is soliciting the government to reduce the import duty on gold and gold ETFs saw the 17th straight day of inflows.

In another potentially supportive longer-term story Gold Fields has apparently decided not to divest itself of its only remaining South African mining asset because of a sudden improvement in performance at their last mine.

While risk-off psychology is in place early today we suspect it will regain momentum in the afternoon in preparation for the next Chinese infection count after the close today. We suspect the gold trade will see increased speculative buying late today by those looking to position for 3 days of market closure and the potential for something surprising to happen in that period.

Given the potential for significant volatility, traders should consider the purchase of gold futures and the purchase of a March (11 days until expiration but that also cheapens the premium cost) at the money put. An alternative for those expecting the worsening virus case is the purchase of a Silver $18.10/$17.60 March bull call spread.

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.