After setting a new 7-year maximum, the price of gold began to decline. The price was pressured by the stock exchanges situation. After today's trading session major global indices moved into the green trading zone, which always leads to a decrease in demand for defensive assets.
At the same time, market concerns remain regarding the spread of coronavirus outside of China. The main attention of the traders is focused on the news from South Korea, Italy and Iran, where the number of new infections is growing rapidly. Therefore, the correction that we are now observing for gold and major stock indices is mainly due to the influence of technical factors, and not fundamental news. The market is gradually recovering, after a rather strong reaction to the news on Monday.
Today, in addition to geopolitical news, it is worth paying attention to the publication of the consumer confidence index for February. Experts predict an increase from 131.6 to 132.0 points. If the data is confirmed, USD can further strengthen its position in the global market, which will become a bearish factor for precious metals.
Regarding the chart, after the breakdown of the level of 1660.00, a correctional wave is rapidly developing. At the same time, now the price has reached a fairly strong intermediate support level of 1630.00, from which we can expect a resumption of the upward trend. Therefore, despite the local trend, today we consider the scenario with the growth of quotations as a priority.
Resistance Levels: 1660.00, 1680.00, 1700.00;
Support Levels: 1630.00, 1616.00, 1600.00.
The main scenario - support testing at the level of 1630.00 and growth towards 1660.00.
An alternative scenario - a breakdown of support at the level of 1630.00 and a decline towards 1616.00.
The fundamental outlook is neutral. We consider longs from the level of 1630.00.