Today the markets reacted fearfully to the ongoing coronavirus outbreak resulting in deep declines U.S. equity indexes, while being highly supportive of the safe haven asset group including gold and silver. Although it is believed that the coronavirus is much less deadly than SARS, it is likely more contagious because of that fact.

Yesterday the Federal Reserve held its first FOMC meeting for the new year, and the new decade. Following the conclusion and the release of this month’s statement it became immediately clear that there were no major changes to their current monetary policy. In fact, there were only a few words that were changed in this month statement when compared to the last FOMC statement.

The Federal Reserve held its first FOMC meeting for the new year, and the new decade. As expected, the Fed announced that they had no intention of changing the current interest rate. According to the statement released today since their last meeting held in December, they maintain that, “the labor market remains strong and that economic activity continues to rise at a moderate rate.”

Market sentiment is based upon the psychological mindset which is used to base future projections upon it can change on perception rather than hard-core information. Today is a good example of that paradigm in action.

Overwhelming concern regarding the spread of the deadly outbreak of the coronavirus in China has morphed into a legitimate global concern about the repercussions that go far beyond the health of individuals. Although that obviously is the primary concern, many analysts believe that this deadly outbreak could grow larger and affect not only communities but also economies worldwide.

On yesterday’s report we spoke about how our technical studies indicated that gold would trade higher, moving to between $1575 and $1594. The studies suggested that the current rally is composed of a counter wave, found in between two bearish corrective waves.

Gold prices recovered modestly gaining six dollars on the day, with February futures currently fixed at $1562.70. The last three trading days can be characterized as a series of lower lows. However, gold continues to trade below the current resistance level of $1566 per ounce. This resistance level is created from a price top that occurred when gold traded to its highest value last year.

Muted trading is the overall characteristic of gold today, it traded within an extremely narrow range of just under $10. Gold futures traded to a high today of $1559.80, and a low of $1550. As of 4:30 PM EST is up $0.60 and is fixed at $1558.50.

When we look at trading activity over the last couple of weeks through the eyes of a weekly candlestick chart it is clear that while gold has had erratic and exaggerated price swings, it is in essence forming a base right around last year’s highest price.

After last week’s historic rise to a seven-year record high for, this week when compared to last week the range is extremely contracted.