Gold price traded higher yesterday as concerns of the coronavirus continued to weigh down on market sentiment. XAUUSD rallied to close at $1,558.38 after bottoming out at $1,550.00. Today, the precious metal is seeing some downward pressure as China made good on its promise to contain the infection. XAUUSD is down at $1,559.00 after peaking at $1,563.47 today.
According to China’s People’s Daily newspaper, the people of Wuhan have been banned from leaving their city. Wuhan has been pinpointed as the epicenter for the coronavirus and is home to 11 million people. It is also a major transport hub which recorded 27 million people flying through the Wuhan Tianhe International Airport in 2019. Following the news, China Airlines have suspended flights to the city. Hong Kong also stopped selling high-speed rail tickets to the city.
On the hourly time frame, we can see that an inverse head and shoulders pattern materialized on XAUUSD. This is apparent by the higher low that gold price made after two consecutive lower lows. It’s worth noting that it has now pulled back to the 50% Fib level (drawing the Fibonacci retracement tool from yesterday’s low to today’s high). In doing so, gold price is also below the neckline. The inverse head and shoulders which is widely viewed as a bullish indicator, is still valid. This is because the most recent low remains higher than the second shoulder. This means that a bullish close above today’s highs at $1,563.50 could indicate that XAUUSD may soon rally to its January 21 highs at $1,568.32.
On the other hand, a bearish close below the second shoulder at $1,554.37 could mean that gold price may soon fall to support at $1,549.00.