Gold Price Drops to Trend Line Support Following US GDP Report
Gold price traded lower yesterday against the US dollar following the preliminary US GDP report. XAUUSD initially trended higher to $1,585.75. However, during the New York session, the precious metal fell to $1,574.07. It was down $2.43 for the day.
Data released by the Bureau of Economic Analysis showed that the first reading of the US’ fourth quarter GDP growth was at 2.1%. It came in as expected, however, the reading for the previous quarter was upwardly revised from 1.9% to 2.1%. This may have allowed the dollar to edge out gold as the top safe haven in yesterday’s trading.
Risk aversion sparked by the spread of the coronavirus has been driving demand for gold price. As of this writing, there are close to 10,000 confirmed cases which is already more than the SARS outbreak of 2003. The World Health Organization has already declared the coronavirus as a “global health emergency” with countries stepping up efforts to contain the spread. The US has issued a travel warning to China while Japan has declared the coronavirus as a “designated infectious disease.”This means that the country will be more stringent in allowing people to enter the country.
On the 4-hour time frame, we can see that the uptrend on XAUUSD is still intact. Connecting the lows of January 14, January 21, January 22, January 23, January 24, and January 20, there could be trend line support at $1,569.45. Reversal candles around this price may indicate that gold price would soon resume its uptrend.
On the other hand, a strong bearish close below this level could indicate that gold price may still slide further. There is near-term support at $1,563.30 where XAUUSD bottomed on January 29.