Gold Price Trades Higher as China Reports Biggest Single-Day Increase in Coronavirus Cases
Just when investors thought the coronavirus outbreak was slowing down, China reported 14,480 new cases. Consequently, risk aversion dominated market sentiment and highlighted gold’s safe haven reputation. Gold price is currently trading $7.5 from its opening price at $1,573.13.
According to government reports, this record-number in new cases is for Hubei alone. This translates to the overall number of cases being at 60,329 with the death toll at 1,369. It is worth noting that the surge in cases is largely due to the change in the way officials qualify infected people. Previously, more time-consuming tests were undertaken in order to know if a person was infected with the coronavirus. As of last night, officials included those with infections showing on lung scans to their count. This is a little problematic because even people who have the flu could show infected scans. On the other hand, this method allows for more people to receive urgent care.
This news turned market sentiment sour because it suggests that scientists are still struggling to understand the coronavirus. Therefore, it hints that the possibility of an effective containment or cure will not likely happen soon.
On the hourly time frame, we can see that gold price seems to have formed an inverse head and shoulders pattern. This is characterized by the higher lows that materialized after XAUUSD traded lower from February 10 to 12. Price action from yesterday’s New York session and this morning has allowed for gold price to close above neckline resistance around $1,569.30. The next near-term resistance is at its February 10 highs at $1,576.75. If there are enough buyers in the market, we may even see gold price rally to its February 3 high at $1,593.00.
On the other hand, if the bullish run loses momentum, gold price could trade lower to its previous neckline at $1,569.30 where the rising trend line also coincides (from connecting yesterday’s lows). If support at this price does not hold, XAUUSD could fall lower to $1,561.50 where XAUUSD bottomed yesterday.