Gold price headed lower as volatility dropped in overnight trading. This happened after it emerged that a drug manufactured by Gilead was showing promising signs during tests at the University of Chicago. The report was released by Stat news, a healthcare industry publication.
The financial market has been anxious about a cure for the disease because they believe that it would reduce the overall risk for the economy. As a result of the news, shares of Gilead jumped by more than 15% while the Dow Jones and the S&P 500 rose by more than 3%. In most cases, the price of gold tends to fall when the overall market rises because investors rotate from gold to high-yielding stocks.
In a statement to the press, Gilead Sciences urged caution, saying that the current reports are just preliminary. The statement said:
“We understand the urgent need for a Covid-19 treatment and the resulting interest in data on our investigational antiviral drug remdesivir. The totality of the data need to be analysed in order to draw any conclusions from the trial.”
The University of Chicago also asked people to be cautious of the news. This was not the first time that the drug had shown positive signs. Just last week, New England Journal said that more than 60% of patients who had received the drug had recovered.
Gold price also fell because of the positive economic data from China. As I reported earlier, data from China showed that the country’s economy slumped in the first quarter. Still, other data like fixed assets investments and industrial production improved. Finally, gold price fell because the dollar index rose following the negative economic data released yesterday.
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Gold Price Technical Analysis
On the four-hour chart, we see that gold price struggled to move above the weekly high of 1,745. The price has since declined and it appears that it is heading towards the 23.6% Fibonacci Retracement level. This retracement was drawn by connecting the lowest point in March with the highest level this week.
Further, the 14-day and 28-day exponential moving averages appear to be turning over but they have not yet made a bearish crossover.
Therefore, I expect the bearish trend to prevail especially if the double EMAs make a complete crossover. If this happens, the next level to watch will be the 23.6% retracement at 1,675.
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