Gold Remains Consolidated

By the time we reached mid-week, gold prices were pushed slightly down due to labour reports, controlled situation of the corona virus and lower demand.

Gold prices edged lower on Tuesday and continue to trade sideways. The Labour Department reported on Tuesday that Job openings dropped in December to their lowest level in two years. Total vacancies now at 6.4 million, down from nearly 6.8 million in November. Wall Street estimates had been for about 6.9 million. Vacancies continued to decline in manufacturing with a 24% decline year-over-year. Overall, the hiring rate fell from 4.3% to 4%. The Job Openings and Labour Market Survey showed that total vacancies outnumber job seekers by nearly 700,000, down nearly by half from a few months ago.

Positive data released sent gold prices down.

Further, In the United States, Federal Reserve Chair Jerome Powell told Congress on Tuesday the U.S. economy is in a good place, but cited the potential threat from the epidemic and concerns about the economy's long-term health.

The corona virus epidemic continued to stifle activity in the physical gold markets in top bullion consumer China and Hong Kong this week, while demand was mixed in other Asian hubs. The death toll in mainland China reached 637 on Friday, with a total 31,211 cases, the World Health Organization chief said, while a Reuters tally showed 320 cases in 27 countries.

Gold was little changed on Wednesday, as equities rose after the number of new corona virus cases fell, while uncertainty over the economic impact of the outbreak underpinned bullion.

While the death toll exceeded 1,000, China's foremost medical adviser on the epidemic said infections may be over by April, with the number of new cases already declining in some places.

As the virus scare is fading out, gold seems to be on a consolidation phase.

But we still see support for gold as the negative knock-on effects of the virus are yet to be witnessed and further the cumulative impact of existing tariffs following the U.S.-China Phase 1 trade deal.

It’s quite possible that China might reduce the purchase of U.S farm products this year under the Phase 1 trade deal. The virus outbreak could further dampen the trade situation between these two countries.

Also keeping gold in check, the U.S. dollar stayed close to four-month highs after soaking up safe-haven flows as worries about the corona virus coincided with recent data showing the U.S. economy's strength.

Gold, which is often used as an insurance against economic risks, tends to appreciate on expectations of lower interest rates, which reduce the opportunity cost of holding non-yielding bullion.

Prithviraj Kothari is the author of this article. Find more information about Prithviraj Kothari.