Gold Costs: Gold Bullish Breakout Potential on Coronavirus Fears


Gold Price Analysis

  • Gold bulls came back into the picture yesterday.
  • Gold prices remain strong, even with the USD trading at four-month-highs.
  • With fear continuing around the spread of Coronavirus, risk aversion potential remains ahead of the holiday weekend in the United States.

Gold Prices Push Back Up to Resistance

The past few weekends have presented an extra item of risk for global markets, as the potential for updates around the spreading Coronavirus created another risk item to keep in mind. With a recent surge in cases seen out of China, that fear has kept the bid in safe-haven markets like the US Dollar and the Japanese Yen; and even with that US Dollar strength as the currency has pushed up to fresh four-month-highs, Gold prices have remained strong. It’s also notable that Gold bulls have continued to hold the bid even with yesterday’s CPI read out of the US, coming in at 2.5%.

This weekend presents another extra item of risk as next Monday is a holiday in the United States; and for many US traders, this is yet another consideration to take into account after China reported another large jump in the number of Coronavirus cases; removing hope that the virus was beginning to slowdown. Already economic impact has been seen as China reported annualized inflation at 5.4% earlier this week, the highest level in eight years as businesses were disrupted and demand for what products were available outstripped supply.

Gold prices came into the week at a key area of resistance, with price action grinding for the first few days. A short-term formation had shown up as a rising wedge, which will often be approached with the aim of bearish reversals. And while sellers did push through Monday and Tuesday, buyers came back on Wednesday to show support and continued to push through Thursday trade.

At this point, Gold price action is holding around the weekly high at 1576. Buyers have pushed in a series of higher-lows over the past few trading days, and topside breakout potential remains ahead of the weekend.

Gold
BULLISH

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of clients are net long.



of clients are net short.

Change in Longs Shorts OI
Daily -2% 2% 0%
Weekly -2% 14% 3%

Gold Hourly Price Chart

GOLD PRICE CHART

Chart prepared by James Stanley; Gold on Tradingview

Gold Prices Bigger Picture

This short-term bullish potential aligns with the longer-term theme of strength in Gold prices. This was looked at as my top trade idea for 2020, but that was largely on the basis of a loose monetary backdrop at the Federal Reserve.

Gold Forecast

Gold Forecast

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Download our Gold Q1 Forecast

But as discussed multiple times in the recent past, the inclusion of fear has brought yet another reason for buyers to hit the bid. Beyond current resistance, the 1587 level remains of interest as this is the 14.4% Fibonacci retracement of the November-January breakout; emanating from the same Fibonacci study in which the 38.2% retracement helped to set the February low last week.

Gold Four-Hour Price Chart

GOLD Four Hour Price Chart

Chart prepared by James Stanley; Gold on Tradingview

— Written by James Stanley, Strategist for DailyFX.com

Contact and follow James on Twitter: @JStanleyFX





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