Gold Prices and Yen Rise on Coronavirus Fears, Iraq Attack

GOLD PRICES, YEN, STOCKS, CORONAVIRUS, IRAQ – TALKING POINTS:

  • Gold prices, Yen higher as coronavirus outbreak fears heat up
  • Rockets target US forces in Iraq, compounding downbeat mood
  • S&P 500 futures hint markets likely to remain under pressure

Gold prices tracked higher haven demand lifted Treasuries and drove yields lower, boosting the appeal of non-interest-bearing alternatives. The typically anti-risk Japanese Yen and Swiss Franc rose in tandem. The US Dollar also found support as the investors’ pivot to “cash out” – that is, reduce exposure to cycle- and sentiment-sensitive assets – drove demand for its unrivaled liquidity.

These moves build on the downbeat tone of Friday’s global performance, as expected. Markets are growing increasingly worried about an economically disruptive coronavirus epidemic amid reports of patients diagnosed with the ailment across broadening distances from the epicenter in Wuhan, China. For context, the 2003 SARS outbreak is estimated to have cost USD 30-100 billion in total losses.

Chart created with TradingView

Swelling tensions in the Middle East are compounding the dour mood. Five rockets were said to have been fired at the so-called Green Zone in Baghdad, Iraq on Sunday. One rocket struck the US Embassy directly, according to Bloomberg News. Reported Iran-backed militias have stepped up attacks on US personnel and facilities in recent months, especially following the US killing of Iranian Quds Force commander Qassem Soleimani.

The sentiment-linked Australian, Canadian and New Zealand Dollars are bearing the brunt of selling pressure in the G10 FX space. Holiday closures have kept many of the top Asia Pacific stock exchanges offline Monday but steep losses on bourses in Japan and New Zealand speak to traders’ gloomy disposition. Bellwether S&P 500 index futures point sharply lower, hinting at more of the same ahead.

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Feb 03

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— Written by Ilya Spivak, Currency Strategist for DailyFX.com

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