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Gold Forecast for February 3-7, 2020

February 3, 2020 at 5:38 by Vladimir Vyun

Gold performed well in January thanks to the negative market sentiment, which soured due to the spreading coronavirus in China. But will the metal continue to move higher at the start of February?

Generally, analysts have a bullish outlook for bullion. The virus continues its march forward, infecting and killing more and more people, resulting in the scare and risk-off trading. Gold, being considered a traditional safe haven, continues to profit from that. Of course, everything can change if China will be able to stop the further spread of the infection. But so far there were no signs of that.

The precious metal can still fail to maintain its upward momentum if this week’s macroeconomic reports in the United States exceed expectations. Markets are especially interested in the manufacturing report from the Institute of Supply Management due for release on Monday and nonfarm payrolls released on Friday. Experts predicted that the ISM manufacturing PMI will show an increase in January but remain in the contraction territory. The employment report is expected to show a stable unemployment rate and accelerating employment growth and wage inflation.

Bullion has a bullish factor in the form of the dovish outlook for the monetary policy of the Federal Reserve. Market participants count on at least one interest rate cut from the Fed by the end of the year. The CME FedWatch page shows about a 90% chance of a cut by the end of 2020. Prices for gold usually move inversely to US interest rates. Therefore, a rate cut would be a very positive event for the metal.

Despite the positive factors, DailyFX was bearish on gold. Among threats to the metal, the site listed the speech of the US President Donald Trump on Tuesday, which may highlight the strength of the US economy, potentially good PMIs in the United States and other parts of the world, and subsiding impact of the coronavirus on markets as traders are getting used to the news about the infection.

If you have any questions and comments on gold today, use the form below to reply.

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