Coronavirus results in Risk-off – Gold about to recapture 1,600 USD?

January 29, 2020 10:30

Source: Economic Events January 29, 2020 - Admiral Markets' Forex Calendar

Gold has seen increasing demand against the region around 1,555 USD, approaching the 2019 yearly highs. The main driver was the latest news and developments on an outbreak of a new virus in China (Coronavirus) which currently sees a bigger impact on world financial markets and the risk tendency among market participants.

While the main question is whether these risk-off tendencies last (based on a 2017 paper, economists calculated that the expected annual losses from pandemic risk could amount to 'only' about $500 billion (ca. 0.6% of global income) per year), Gold still finds other, bullish drivers.

While today's Fed rate decision shouldn't deliver anything new and we don't expect much from it, in fact, see a re-formulation of the status quo, any changes of the current forward guidance in regards to the recent funding pressures in the Repo market will be more dovish and thus positive for the precious metal.

Technically, we favour further gains in Gold, too. As long as we trade above 1,440/450 USD the potential next target on the upside can be found in the region around 1,650/700 USD.

And then there is also a noteworthy bullish seasonality.

Last week on Friday, Gold entered a bullish seasonal window, which lasts until February 4.

In more detail, the seasonal bullish pattern developed over the last 20 years with Gold seeing an average gain of 23.50 USD for 15 of the past 20 years.

In the remaining five years, it dropped on average only 11.73 USD, while the maximum loss of the pattern was 23.90 USD and the maximum drawdown being 26.05 USD, adding to the advantageous outlook for Gold bulls:

Source: Admiral Markets MT5 with MT5-SE Add-on Gold Daily chart (between October 17, 2018, to January 28, 2020). Accessed: January 28, 2020, at 10:00pm GMT - Please note: Past performance is not a reliable indicator of future results, or future performance.

In 2015, the value of Gold fell by 10.4%, in 2016 it increased by 8.1%, in 2017 it increased by 13.1%, in 2018, it fell by 1.6%, in 2019, it increased by 18.9%, meaning that after five years, it was up by 28%.

Discover the world's #1 multi-asset platform

Admiral Markets offers professional traders the ability to trade with a custom, upgraded version of MetaTrader 5, allowing you to experience trading at a significantly higher, more rewarding level. Experience benefits such as the addition of the Market Heat Map, so you can compare various currency pairs to see which ones might be lucrative investments, access real-time trading data, and so much more. Click the banner below to start your FREE download of MT5 Supreme Edition!

Disclaimer: The given data provides additional information regarding all analysis, estimates, prognosis, forecasts or other similar assessments or information (hereinafter "Analysis") published on the website of Admiral Markets. Before making any investment decisions please pay close attention to the following:

  1. This is a marketing communication. The analysis is published for informative purposes only and are in no way to be construed as investment advice or recommendation. It has not been prepared in accordance with legal requirements designed to promote the independence of investment research, and that it is not subject to any prohibition on dealing ahead of the dissemination of investment research.
  2. Any investment decision is made by each client alone whereas Admiral Markets shall not be responsible for any loss or damage arising from any such decision, whether or not based on the Analysis.
  3. Each of the Analysis is prepared by an independent analyst (Jens Klatt, Professional Trader and Analyst, hereinafter "Author") based on the Author's personal estimations.
  4. To ensure that the interests of the clients would be protected and objectivity of the Analysis would not be damaged Admiral Markets has established relevant internal procedures for prevention and management of conflicts of interest.
  5. Whilst every reasonable effort is taken to ensure that all sources of the Analysis are reliable and that all information is presented, as much as possible, in an understandable, timely, precise and complete manner, Admiral Markets does not guarantee the accuracy or completeness of any information contained within the Analysis. The presented figures refer that refer to any past performance is not a reliable indicator of future results.
  6. The contents of the Analysis should not be construed as an express or implied promise, guarantee or implication by Admiral Markets that the client shall profit from the strategies therein or that losses in connection therewith may or shall be limited.
  7. Any kind of previous or modeled performance of financial instruments indicated within the Publication should not be construed as an express or implied promise, guarantee or implication by Admiral Markets for any future performance. The value of the financial instrument may both increase and decrease and the preservation of the asset value is not guaranteed.
  8. The projections included in the Analysis may be subject to additional fees, taxes or other charges, depending on the subject of the Publication. The price list applicable to the services provided by Admiral Markets is publicly available from the website of Admiral Markets.
  9. Leveraged products (including contracts for difference) are speculative in nature and may result in losses or profit. Before you start trading, you should make sure that you understand all the risks.
Admirals An all-in-one solution for spending, investing, and managing your money

More than a broker, Admirals is a financial hub, offering a wide range of financial products and services. We make it possible to approach personal finance through an all-in-one solution for investing, spending, and managing money.