Gold seeks direction while waiting for Fed announcement, coronavirus risk does not disappear

The price of spot gold (XAU / USD ) registers slight advances on Wednesday morning and rises about 0.4% to the edge of $ 1573 an ounce, supported by the nervousness of investors due to the ” coronavirus ” epidemic . The disease that originated in China has caused 132 deaths and 6078 infections in the Asian nation, figures that exceed the official number of infections during the outbreak of SARS in 2003.

Gold is considered a refuge asset, so it usually rises in periods of financial turbulence and economic uncertainty.

Another factor that reinforces the caution of investors is the Federal Reserve monetary policy decision scheduled for this afternoon at 2:00 pm New York time. While no interest rate changes or important announcements are expected, Jerome Powell could take the opportunity to highlight the risks that the spread of the coronavirus represents for the US and world economy.

If the president of the central bank raises the alerts and transmits a “dovish” signal , many investors could begin to modify their expectations and discount new injections of stimuli on the way to the US presidential elections scheduled for November 3. This scenario would undoubtedly favor gold whose price tends to rise during monetary easing cycles.

On the other hand, if Powell does not show much concern about the health crisis in China and maintains optimism about the stabilization of the activity, it is possible that the price of gold begins to lose ground in the short term, as traders alter the composition of their portfolios in favor of higher yield assets.

GOLD TECHNICAL ANALYSIS

As long as the price of gold remains above its 20-period moving average and the upward trend line drawn from the end of September 2019 (blue line), the bias will remain bullish. If so, the price of the yellow metal could go for $ 1588 in the next sessions. This resistance corresponds to the 61.8% Fibonacci retracement of the fall from September 2011 to November 2015.

Alternatively, if sellers take control of the market and a breakdown of the support zone of 1555/1550 materializes, XAU / USD could fall to the next technical floor at $ 1535.

GOLD TECHNICAL GRAPH