By Barani Krishnan
Investing.com - Gold prices rebounded from last week’s unexpected slide, briefly hitting the key $1,600 level critical for longs in the yellow metal.
But the advance could be limited and further losses are likely after risk trades, including those in oil and stocks, came roaring back on Monday on action promised by global central banks in fighting the coronavirus.
“After last week’s big falls, more pain could be on the way for gold bulls than gains this week,” said Fawad Razaqzada, a technical chartist at forex.com for both macro commodities and currencies. “While I still remain bullish on gold in the long term, I now think prices may go on to correct themselves for a while before starting to push higher again.”
Gold futures for April delivery on New York’s COMEX settled up $28.10, or 1.8%, at $1,594.80 per ounce, after rising 2.8% earlier to a session high of $1,612.05. The contract lost 3.7% last week, dashing the hopes of gold longs who expected the safe haven to hit $1,700 highs on the back of fears related to the coronavirus.
Spot gold, which tracks live trades in bullion, was at $1,595.08, or 0.7%, by 2:15 PM ET (19:15 GMT). It rallied earlier to $1,610.99.
Both {{U.S. crude}} and the U.K. Brent oil benchmarks jumped about 5%, while Wall Street’s three major stock indexes rose more than 2% each on expectations of OPEC production cuts and promises of global stimulus to fight the novel coronavirus.
Fed funds futures were pricing in a 100% chance that the Federal Reserve will cut rates by 50 basis points at its meeting March 18, Investing.com’s Fed Rate Monitor Tool showed.
The Bank of Japan and Bank of England both said they are ready to take steps to stabilize markets. The Group of Seven finance ministers is scheduled to hold a teleconference this week to coordinate response to the viral outbreak.
George Gero, who oversees the precious metals portfolio for RBC Wealth Management in New York, shared Razaqzada’s view that gold will go higher, though volatility is the order for now.
“Many are treating gold as a trading vehicle looking at stocks,” Gero said. “However, many haven-buyers continue to want to add to positions at lower prices for longer term holdings.”