• Coronavirus crisis continued to take its toll on global economic growth.
  • Speculative interest demanded liquidity rather than safety, the dollar won.
  • Spot gold could remain under pressure despite the risk-averse mood.  

Gold prices saw no relief despite mounting panic throughout this past week. Speculative interest chose to keep buying the greenback as equities collapsed and the hunger for liquidity dominated it all. Spot gold fell to 1,451.16, its lowest since last November, and seems poised to close the week around $1,500 a troy ounce.

Coronavirus crisis moved to Europe

The coronavirus crisis remains the main market motor, as the epicentre of the outbreak has moved to Europe. As China reports no new cases, those in Italy and Spain continue to grow exponentially. Italy has the unfortunate record of having surpassed China in the death toll, with the latest number reported at 3,405. Other European countries are also seeing a large increase in the number of cases, with Germany, France, and Switzerland among the most affected beyond Italy and Spain.

Most countries have announced travel bans and schools’ lockdown, in an attempt to slow the spreading curve and prevent health systems from collapsing, while central banks worldwide announced stimulus measures. Equities collapsed and the greenback stood as king.

The market’s mood improved by the end of the week, with demand for the dollar easing and gold bouncing modestly alongside equities, as central banks injected colossal amounts of money. Even the Reserve Bank of Australia announced its first-ever QE program this week.

In the particular case of the US Federal Reserve, the central bank slashed rates for 150 bps in two weeks and announced it would start buying corporate bonds to provide short-term funding to business. Finally, the Fed established dollar liquidity-swaps with fourteen other central banks throughout the week, to help them met the demand for dollars from foreign companies and financial institutions.  

Manufacturing and Services PMI take centre stage

Markit will release next Tuesday the preliminary estimates of the US Manufacturing PMI and Services PMI for March, which should reflect the first effects of the coronavirus on the economy. The numbers are expected to have shrunk from February final readings, with manufacturing output seen at 50 and services activity contracting to 48.8. The outcome, however, could be worse than that.  

Worth mention that the US Census Bureau suspended field operations for two weeks, which means that the release of macroeconomic data could be altered in the upcoming days.

Spot Gold Technical Outlook

Spot gold fell from a multi-year high of 1,703.18 to a 2020 low of 1,451.16 in just to weeks, now struggling below the 1,500 level. Measuring such slump, the 23.6% retracement stands at 1,510.33, with the bright metal meeting sellers this Friday at 1,516.11. The 38.2% retracement of the mentioned slump comes at 1,547.13.

The weekly chart shows that spot settled below a now flat 20 SMA while still holding above the larger ones. The Momentum indicator heads south vertically just above the 100 level, while the RSI has already pierced its mid-line, now at 46, in line with further falls ahead.

Daily basis, gold settled below all of its moving averages, with the 200 SMA at 1,501.50. Technical indicators bounced from oversold readings, holding well into the red and far from suggesting a possible recovery ahead.

A steady recovery above the mentioned Friday’s high at 1,516.11 should lead to a corrective advance toward the next Fibonacci resistance, although there are no signs that the metal could extend its gains next week. Below $1,470.00, the risk will turn back south, with the market eyeing a retest of the yearly low.

Gold Sentiment Poll

The FXStreet Forecast Poll shows that the bright metal is expected to consolidate around the current level next week, but those betting for higher-than-current levels are a majority in the monthly and quarterly perspectives. Bulls stand for 50% in the one-month view, and at 61% in the three-month outlook.

The Overview chart, however, paints quite a different picture, as despite most targets accumulate above the current level, moving averages offer sharp bearish slopes, at fresh multi-week lows, a sign that the market is moving fast to unwind gold longs, and that it will likely keep doing it.   

Related Forecasts:

EUR/USD Forecast: Don’t get too optimistic, this is just starting 

GBP/USD Forecast: Sell the rally mode as the coronavirus crisis could get worse

Information on these pages contains forward-looking statements that involve risks and uncertainties. Markets and instruments profiled on this page are for informational purposes only and should not in any way come across as a recommendation to buy or sell in these assets. You should do your own thorough research before making any investment decisions. FXStreet does not in any way guarantee that this information is free from mistakes, errors, or material misstatements. It also does not guarantee that this information is of a timely nature. Investing in Open Markets involves a great deal of risk, including the loss of all or a portion of your investment, as well as emotional distress. All risks, losses and costs associated with investing, including total loss of principal, are your responsibility. The views and opinions expressed in this article are those of the authors and do not necessarily reflect the official policy or position of FXStreet nor its advertisers.

Analysis feed

FXStreet Trading Signals now available!

Access to real-time signals, community and guidance now!

Latest Analysis


Latest Forex Analysis

Editors’ Picks

EUR/USD bounces after upbeat COVID-19 cure news

EUR/USD is trading above 1.13, rebounding from the lows. Gilead reported that its drug Remdesevir substantially reduces mortality among COVID-19 patients. The news boosted stocks and weighed on the dollar. US coronavirus statistics are due out.

EUR/USD News

GBP/USD recaptures 1.26 as the market mood improves

GBP/USD is trading above 1.26 as the market mood improves and the safe-haven dollar retreats. Investors are shrugging off Brexit concerns and focusing on hopes to cure coronavirus. US COVID-19 statistics are due out.

GBP/USD News

XAU/USD consolidates daily gains above $1,800

After advancing to its highest level since September of 2011 at $1,818 on Wednesday, the XAU/USD pair staged a correction and briefly dropped below $1,800 on Thursday.

Gold News

Cryptocurrencies: War for dominance hit the bedrock of the market

Bitcoin tried to regain market share and activated sales in the Altcoin segment. BTC/USD, ETH/USD and XRP/USD are looking for supports and a rebound to push them to new elative highs. The current compression on the XRP/USD chart could trigger an exploding movement.

Read more

WTI once again breaks $40 per barrel after trading lower in early EU trade

There has been quite the bounce in WTI since the EU session after some strong selling pressure during Thursday and overnight. Once again on Friday's session, the price has taken the USD 40 per barrel handle. 

Oil News

Forex Majors

Cryptocurrencies

Signatures