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Gold Price Rallies to Its Highest Level in 7 Years on Coronavirus Concerns

Gold prices
Gold prices

Contrary to higher-yielding assets like stocks and risk currencies like the Aussie and Kiwi, gold price is enjoying a bullish run amid risk aversion. XAUUSD is trading at its 7-year highs just above $1,660.00 as concerns about the coronavirus mount.

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Over the weekend, G20 leaders convened in Saudi Arabia. Policymakers openly expressed their concerns about the impact of the coronavirus outbreak. For instance, IMF Director Georgieva warned that China’s economic growth could fall below 6% this year. This is worrisome because the country has been significantly driving global growth in recent years. South Korea also announced that its recovery may stall amid the outbreak. It also did not help that China did not send a delegation to the G20 meetings to offer options to support growth.

Gold Price Outlook

On the monthly time frame, we can see that the next major resistance level for XAUUSD would be its October 2012 highs around $1,795.55. If risk aversion continues to dominate trading, we may just see gold price rally to this level. However, a closer look at the 4-hour chart suggests that gold price may soon pare some of its gains. A shooting star candlestick has materialized. This is widely regarded as a bearish reversal signal. If there are enough sellers in the market, gold price could trade lower to $1,649.00 and fill the weekend gap.

This price also coincides with the 38.1% Fib level when you draw the Fibonacci retracement tool from the low of February 20 to today’s high on the 1-hour chart.