Yahoo Finance Price of Gold Fundamental Daily Forecast – Traders May Be Waiting for WHO to Declare Global Emergency
Gold futures are inching lower on Thursday after giving up earlier gains that were fueled by rising fears over the spread of China’s new flu-like virus. Although some analysts are saying the market is being supported by safe-haven buying, I don’t see it. Take a look at March 10-year Treasury notes or the Japanese Yen if you want to see what safe-haven buying looks like.
At 06:50 GMT, April Comex gold is trading $1562.70, down $0.20 or -0.01%.
The price action in the gold market tells me that gold is an investment, not a safe-haven asset. If it goes up, it will because of lower interest rates and demand for risky assets. Both assets compete with gold for investment capital.
Coronavirus Update
This is an ongoing problem so expect the story to change throughout the day. The latest from CNBC has more than 500 confirmed cases and 17 deaths in China. On Thursday, the World Health Organization (WHO) will decide whether to declare a global emergency over the outbreak. This could be a game-changer.
If WHO declares an emergency then traders will speculate that there could be a significant economic impact. If this is the case then stocks are likely to plummet, and safe-haven bonds and Japanese Yen are likely to rise sharply.
With bonds rallying, interest rates will plunge. The drop in interest rates is going to be what drives investors into the gold market. Stock market investors will trim positions at first then park some of the proceeds into gold as a hedge against a further decline in stock prices.
Chinese Demand
At this time, gold traders are in limbo because they aren’t sure about the next moves by the Chinese government or what WHO is going to declare.
Traders remained anxious about the spread of the virus as China gears up to celebrate the Lunar New Year starting this weekend. This is typically a peak period for travel and gold demand in the region.
European Central Bank Decisions
Gold traders are also keeping an eye on the monetary policy meeting by the European Central Bank (ECB) on Thursday. ECB President Christine Lagarde is expected to launch a broad review of its policy that is likely to see her redefine the central bank’s main goal and how to achieve it.
Daily Forecast
Gold looks like it doesn’t have the impetus it needs to move in a big way in either direction. It could get some guidance from the ECB, but I think investors are really waiting for the WHO to declare whether there is a global emergency over coronavirus or not.
If traders bet on economic turmoil then gold prices are likely to rise. If the markets accept the news and investors decide to move on then gold prices may weaken. I think investors will think a little clearer once the uncertainty and fear is removed from the market.
It’s funny. The news tends to lead investors to believe that gold is a buy when there is uncertainty and fear in the markets, but this type of thinking doesn’t seem to be working at this time.
This article was originally posted on FX Empire
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