Gold Steadies After Weakening Over Rally in Global Equities

Gold Steadies After Weakening Over Rally in Global Equities

Posted Wednesday, February 5, 2020 by
Arslan Butt • 1 min read

Gold prices are trading somewhat steady early on Wednesday after weakening as a result of a major sell-off in the previous session, fueled by a sudden rally in global stock markets. At the time of writing, GOLD is trading at a little above $1,556.

While the safe haven appeal of gold remains in favor over concerns about the economic fallout of the coronavirus outbreak, Tuesday saw an unexpected rally in Chinese stock markets, which then spilled into the European and American markets as well, keeping the yellow metal under pressure. Gold also faced pressure on account of a strengthening dollar on the back of strong economic data releases from the US.

The precious metal prices share a negative correlation with the dollar, which has been gaining on account of a larger than expected increase in factory goods orders for the month of December. Positive economic data from the US reinforces markets’ belief in the strength of the US economy, weakening the demand for gold.

However, analysts believe that the weakness in gold prices is momentary and cannot be sustained unless the rally in global equities lasts longer. For the moment, however, the outlook on gold remains bullish on account of reigning uncertainties surrounding the coronavirus and its impact on economic growth.

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