Gold Price Turns Bullish as Coronavirus Fears Spur Flight to Safety
Gold Price Technical Highlights:
- Gold price trying to drive through long-term resistance
- Coronavirus fears upstarting a macro-move in markets
Gold price driving to drive through long-term resistance
Markets are anxious as fears surrounding the coronavirus continue to mount, sparking selling in risky assets in favor of save haven markets such as gold. It’s times like these that the typically negative correlation breaks down between the Dollar and gold, with market participants more concerned about seeking the highest ground.
Just recently, after the January 8 spike-and-reverse, I was discussing the need for gold to digest the late-year run, that a few weeks of sideways to down price action were likely in order. While that period may be over, it is unclear as to whether the coronavirus will be enough of a driver to keep markets in risk-off mode, and gold trekking higher.
Turning to the technical picture, gold is in a significant battle with long-term resistance via the 2011/12 topping process discussed on numerous occasions since the first run-in back in September. The January 8 spike had price above the top-end of resistance (~1575), but ultimately it failed to hold. A break higher that can sustain above the 1611 high from earlier this month could finally have gold in the open space its been trying to seek since September.
But, if events take a turn for the better with regard to the coronavirus outbreak, then look for gold to stall soon and continue to digest the December run. From a technical standpoint this wouldn’t be a bad thing for longer-term prospects as sideways periods along the way during a rally are a healthy occurrence. In that event, as long as price doesn’t sink below the trend-line from May, then gold will keep itself set-up for another run.
Gold Price Daily Chart (pushing towards 1611 high)
Gold Price Weekly Chart (2011/12 levels still stand in the way)
***Updates will be provided on the above technical outlook in webinars held at 1030 GMT on Tuesday and Friday. If you are looking for ideas and feedback on how to improve your overall approach to trading, join me on Thursday each week for the Becoming a Better Trader webinar series.
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---Written by Paul Robinson, Market Analyst
You can follow Paul on Twitter at @PaulRobinsonFX
DailyFX provides forex news and technical analysis on the trends that influence the global currency markets.