Fears that the coronavirus will morph into a global pandemic rocked the markets in Monday’s trading session as the Dow Jones Industrial Average lost 1,000 points, effectively wiping out the year’s strong start to 2020. In the meantime, the flight from stocks to safe havens is feeding into more strength for gold as it soared to a 7-year high.
“Markets worldwide are getting rocked by a marked increase over the weekend in trader and investor fears amid the still-growing coronavirus outbreak,” wrote Jim Wyckoff in Kitco News. “Gold is up around $40 an ounce and at a seven-year high, U.S. Treasuries are rallying sharply, the U.S. dollar index is up, crude oil prices are sharply down and much of the rest of the raw commodity sector is feeling selling pressure. Asian and European shares were down overnight. U.S. stock indexes are pointed sharply lower openings when the New York day session begins, with the DJIA down over 700 points.”
“While the human toll from the coronavirus (covid-19) is growing, the likely economic toll also is expanding,” Wyckoff added. “What is gripping markets is the keen uncertainty of how this situation will eventually play out. There is no consensus at all regarding the outcome. China recorded the total number of afflicted at over 77,000 and over 2,350 dead. The illness is also spreading in South Korea. Northern Italy has some towns quarantined after the covid-19 illness was discovered spreading in that region, including three deaths.”
From a technical perspective, the bulls have the upper hand in the short-term moving forward.
“Technically, the gold bulls have the strong overall near-term technical advantage to suggest still more upside in the near term,” wrote Wyckoff. “A 3.5-month-old price uptrend is in place on the daily chart. Bulls’ next upside price objective is to produce a close in April futures above solid resistance at $1,700.00. Bears’ next near-term downside price objective is pushing futures prices below solid technical support at $1,620.00. First resistance is seen at the overnight high of $1,691.70 and then at $1,700.00. First support is seen at $1,670.00 and then at $1,660.00. Wyckoff’s Market Rating: 9.0.”
Gold ETFs Exposure
Investors looking to get in on gold can look at funds like SPDR Gold Shares (NYSEArca: GLD) and the SPDR Gold MiniShares (NYSEArca: GLDM). Precious metals like gold offer investors an alternative to diversify their holdings, and like other commodities, gold will march to the beat of its own drum compared to the broader market.
Traders looking for leverage can use funds like the Direxion Daily Gold Miners Bull 3X ETF (NYSEArca: NUGT), VanEck Vectors Gold Miners (NYSEArca: GDX) and the Direxion Daily Jr Gold Miners Bull 3X ETF (NYSEArca: JNUG).
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