Gold price punished by big rally in U.S. stock market

February 4, 2020

New York (Feb 4)  Gold prices are sharply down, near session lows, and at a three-week low in midday U.S. futures trading Tuesday. The safe-haven metal is reeling as its competing asset class, equities, are seeing rallies this week, led by strong gains in the U.S. stock market that has its indexes once again back near their recent record highs. Solid gains in the U.S. dollar index this week are also bearish for the metals markets. February gold futures were last down $28.60 an ounce at 1,553.70. March Comex silver prices were last down $0.155 at $17.52 an ounce.

Asian stock markets rebounded overnight after Monday’s sell-off. European stock markets were also higher. So far this week trader and investor risk appetites are keen and the marketplace appears to be moving beyond the coronavirus outbreak that continues to spread. Latest counts show over 20,000 Chinese citizens afflicted with over 425 dead, with air travel to China being significantly curtailed and global and domestic business there disrupted.

Importantly, China’s central bank this week has injected large amounts of money into its financial system to help out domestic businesses that are being hurt by the coronavirus outbreak. This move has helped to assuage Asian investors as well as others around the globe.

The other key outside market today sees crude oil prices firmer and trading around $50.50 a barrel, on a minor upside correction after hitting a 13-month low overnight. The slumping oil market is also a bearish outside force for the metals markets.

Technically, April gold futures bulls still have the slight overall near-term technical advantage but are fading as a three-month-old price uptrend on the daily bar chart has at least temporarily been negated. Gold bulls' next upside near-term price breakout objective is to produce a close above solid technical resistance at this week’s high of $1,598.50. Bears' next near-term downside price breakout objective is pushing prices below solid technical support at $1,535.00.


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