Gold recovers modestly following yesterday’s double-digit decline

Gold prices recovered modestly today, after dropping by double digits yesterday. Although gold prices were tempered by dollar strength both gold futures and spot prices managed to eke out a small gain on the day.

Spot gold is currently at $1557.30, after factoring in today’s gain of $4.60. However, that net gain was tempered by dollar strength which accounted for a - $5.30 drawdown. Normal trading activity actually bid the precious yellow metal higher by $9.90, this according to the Kitco Gold Index (KGX).

Currently supporting gold prices are the continued actions by the Federal Reserve as well as global central banks. The People’s Bank of China infused a large amount of capital on Monday and Tuesday to support the falling stock prices in China. There is also a renewed concern about the spread of the coronavirus. Unlike the SARS epidemic, the coronavirus is proven to be much less fatal to those the contract the virus. The net result is that the virus is able to spread as individuals who are sick and do not yet show symptoms or have recovered can continue to spread the virus to others.

As reported in the New England Journal of Medicine, “The novel coronavirus (2019-nCoV) from Wuhan is currently causing concern in the medical community as the virus is spreading around the world.1 Since its identification in late December 2019, the number of cases from China that have been imported into other countries is on the rise, and the epidemiologic picture is changing on a daily basis. We are reporting a case of 2019-nCoV infection acquired outside of Asia in which transmission appears to have occurred during the incubation period in the index patient.”

Officials today confirmed the first case of the coronavirus in Wisconsin. Although this only raises the total number of cases in the United States to 12, hundreds of Americans were evacuated from the city at the center of the outbreak that landed in California.

As reported by CBS News, “The two planes, carrying about 350 people in total, arrived at Travis Air Force Base in Northern California and Marine Corps Air Station Miramar in Southern California. All the passengers will spend up to two weeks under quarantine in California while they are monitored for symptoms of the potentially deadly new virus.”

CNN today reported that the virus has killed 494 people worldwide, the vast majority residing in China. It has infected more than 24,600 people in over 25 countries.

Measures to curtail the spread of the virus in China has led the government to lock down roughly 60 million people with three cities reporting over a thousand confirmed cases.

In other words, it is highly likely that this epidemic will grow worse and could potentially inflict widespread devastation. Multiple pharmaceutical companies are currently working on a remedy for the virus on two fronts. Some pharmaceutical companies are testing existing medications to see if they have any positive impact on eradicating the virus, while other pharmaceutical companies are attempting to create a vaccine for the virus.

The impact of the coronavirus epidemic in addition to global central banks being highly accommodative with infused liquidity and low interest rates could continue to be supportive of the safe haven asset class. That being said the Standard & Poor’s closed at a new all-time record high today and the 11-year rally continues unphased.

Wishing you as always, good trading,