Gold Prices Rally Halted on Firmer Dollar

January 28, 2020 | Tuesday



On Tuesday, a rally in gold prices came to a pause after the stronger dollar outweighs mounting concerns over a new coronavirus that has boosted demand for safe-haven assets. Spot gold slumped 0.1% to $1,579.38 an ounce following a three-week peak hit on Monday. Then, U.S. gold futures inched higher by 0.1% to $1,578.10. Moreover, gold prices gained during the previous four sessions as the spread of the coronavirus disturbed financial markets. They prompted authorities to require travel restrictions and extend the Lunar New Year holidays. Then, raising fears about the economic effect of the new coronavirus are underpinning gold at these $1,580 per ounce levels. National Australia Bank (NAB) economist John Sharma stated, "(Gold) could reach $1,600, but would be more around the $1,570-$1,590 levels as we need to get more information. There a lot of unknown variables around the virus." Furthermore, Asian shares extended a global selloff on Tuesday as the death toll from the virus reached 106 in China. Some health experts are questioning whether Beijing could contain the virus that has spread to over ten countries, including France and the United States. People know gold as a safe investment during times of economic and political uncertainty. But the bullion's momentum was halted by a steadier dollar, hovering close to a near two-month high hit in the last session. Gold seems to consolidate Monday's gains as a number of traders are off for the Chinese New Year. This pins bullion towards $1,580, according to an analyst.

The Federal Reserve

Also, investors are pouring their attention on the U.S. Federal Reserve's first meeting of the year starting on Tuesday. And a lot are expecting that they keep interest rates unchanged. Then, lower interest rates diminish the opportunity cost of holding non-yielding bullion. Aside from that, holdings of the world's largest gold-backed exchange-traded fund, SPDR Gold Trust, declined 0.13% to 899.41 tonnes on Monday. Other precious metals, palladium, moved up 1.4% to $2,299.96 per ounce after falling as much as 7% in the previous session. Silver dropped 0.2% to $18.05, and platinum advanced 0.4% to $987.73. Commodity Markets Vs. China Virus Moreover, commodity investors are taking flight as worries continue to deepen about the spread of the coronavirus. As a result, it might hurt China's demand for everything from crude oil to rubber. Prices are spiraling as the death toll increases in China and a rise of new cases emerge around the world. Now, traders who keep commodities flowing in and out of the world's biggest consumer would usually expect an uptick in demand. And this happened after a lull during the Lunar New Year holidays that officially began last week.


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