Coronavirus is consuming the markets. Gold eyeing $1,700

24 February 2020

The coronavirus keeps spreading and is taking its toll, continuing its effect on the financial market.

President Xi Jinping of China has sounded the alarm over the outbreak at the Communist Party's gathering. In northern Italy, the industrial heartland has been put under lockdown due to a significant cluster of cases. Italian authorities confirmed the 5th death case today, with 157 infected so far

In regards to the financial market today, while the Japanese Yen is mostly unchanged, Gold prices extended its gains, eyeing the 1,700$ mark.

Gold breaks through

Gold prices rose by more than 2% today, reaching its highest since February 2013. This comes as the fears deepen with the spikes in the number of cases outside China. There are also worries amongst investors about the effect of the virus hitting the global economic growth, which explains the flight to safe haven assets.

China, on the other hand started to allow relaxed movements in areas such as Beijing, after reporting that number of new cases in Mainland China slowed.

The surge in Gold's prices came after investors started to dump shared and moved towards the safety of bonds.

"Expect demand to remain firm through $1,660-$1,650, while there's little top-side resistance on the way to $1,700,"as per MKS PAMP GROUP

Oil Prices Slump

The price of Oil tumbled by 3% today, again because of the fears that the Coronavirus' effect on the market as it keeps spreading outside China.

New cases of infection in Italy, Iran and South Korea made the price of Brent crude lower than 3% to $56.72 after reaching an intraday low of $56.53 earlier today. US Crude also fell by 3% as demand for Oil is expected to keep lowering as travel restrictions keep increasing.

"Oil prices will remain vulnerable here as energy traders were not pricing in the coronavirus becoming a pandemic. "While some parts of China are seeing improving statistics with the coronavirus, financial markets will remain on edge until we start seeing the situation improve in Iran, Italy, South Korea and Japan," Edward Moya, senior market analyst at OANDA.

However Oil prices received some support when China said on Monday that four of its provinces lowered emergency responses measures.

Financial Events to watch for today

12.00 GMT - CHF Domestic Sight Deposits

16:30 GMT - USD Chicago Fed Nat Activity Index