Gold: On the back foot below $1,570 as coronavirus fears recede
- Gold extends pullback from Monday’s top, drops to intra-day low.
- A gradually diminishing rate of new coronavirus cases, China’s readiness to confront the contagion favor the risk-tone.
- Global central bankers and trade positive comments also play their roles.
- Fed Chair Powell’s Testimony, US inflation/Retail Sales will be the keys to watch.
Gold prices seesaw near $1,567, following the decline to the intra-day low of $1,566, by the press time of Wednesday’s Asian session. In doing so, the bullion registers the second day of declines based on the recent recovery in trade sentiment. While overall optimism conveyed by the major central bankers could be cited as an additional force, the main reason behind the recent risk recovery seems to be receding new cases of coronavirus infected and dead people from China.
The latest numbers from China’s Health Commission suggests that there are 1,638 new cases of coronavirus infected people from Hubei, the epicenter of the deadly disease. Compared to the previous day’s 2,097 cases, the contagion seems to weaken off-late. Further, the World Health Organization (WHO) has already said that the vaccine could be ready in 18 months, giving a boost to the risk-on.
Also supporting the risk-tone could be the latest comments from the global rating giant S&P that expects the contagion impacts to reverse from early 2021. Additionally, the reopening of factories in China, as well as the liquidity infusion and other steps from Beijing to tame the side effects of the outbreak, also play their role to keep the risk-takers happy.
Earlier, central bankers from the Fed, the BOE and the ECB crossed wires while failing to show a major disappointment due to the Chinese epidemic. The leader, the Fed Chair Jerome Powell, sounded cautiously optimistic while praising the latest slew of data.
Moving on, the second day of the Fed Chair Powell’s testimony, today in front of the Senate Banking Committee, could offer additional details of the Federal Reserve’s future action. On the data front, the US Consumer Price Index and Retail Sales, as well as Michigan Consumer Sentiment, will be the keys to watch.
Technical Analysis
21-day EMA near $1,562 acts as the immediate support whereas a downward sloping trend line from January 08, at $1,587 now, becomes important during the precious metal’s rise.