Why has the price of gold gone cold? The precious metal has been climbing in five waves on the monthly charts and could be on the verge of a correction.
27 January, 2020 | HYCM – Last week I was surprised by the limited reaction in the price of gold. With so much risk-off tones in the air due to the coronavirus, I had expected to see more than the very muted reactions in the price of the yellow metal. So, it was helpful to come across this Bloomberg piece which illuminated the perspective for gold price.
3 reasons Gold price has been under the weather
The following 3 factors have been keeping a lid on gold price:
- Recession fears have fallen. The Bloomberg Economics US Recession probability model shows receding chances of a downturn within the next 12 months. The latest reading is strongly down from 2019 highs and below the levels that anticipated past recessions. The November reading was 26% down from 29% in October. Also, early indications are that December’s readings will show reduced risks for 2020.
- Russia is losing interest. Russia, the world’s biggest buyer of gold, is losing interest in the precious metal. China’s gold buying is on hold.
- Gold ETF holdings on the rise – According to data compiled by Bloomberg, gold ETF holdings have moved higher again. However, subject to a major geopolitical flare-up tensions remain elevated.
Sadly, the coronavirus is now gripping the market after a 2% fall in the Nikkei overnight and the extent of the coronavirus starts to expand. I liked Nikkei shorts last week and they look set to fall further through near term daily support.
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