Gold snaps two-day recovery, stays above $1,600, as trade sentiment sours

• Gold fails to extend the previous recovery gains amid fresh challenges to risk.
• Wuhan Chief cited coronavirus resurgence risk, Washington Governor extends lockdown.
• S&P keeps US rating/outlook intact, expects a recovery in 2021.
• US ISM Non-Manufacturing PMI, employment data will provide fresh impetus.

With the fresh challenges to risk-tone weighing on commodities, Gold snaps the previous two-day winning streak while declining to $1,610, down 0.07%, amid early Friday. The recent challenges to the yellow metal are likely from the coronavirus (COVID-19) front. It’s worth mentioning that the bullion earlier seemed to be benefited from the market’s risk-on due to US President Trump’s tweet suggesting an oil production cut pact between Saudi Arabia and Russia.

Communist Party Secretary of China's Wuhan says the risk of coronavirus resurgence in the city is still high. Adding burden to the risk-tone could be the extended lockdown of Washington state until May 04, 2020.

On the contrary, S&P affirmed its AA+ credit rating, with a stable outlook, for the US while also expecting the economic losses to offset in 2021.

While portraying the risk-tone the US 10-year Treasury yields drop below 0.60%, down three basis points (bps), whereas the US stock futures also mark losses of near 1.0% by the press time. Even so, stocks in Asia-Pacific are mildly positive following the recent Aussie, Japan data.

Being the first Friday of the month, traders will keep eyes on the US economic calendar for fresh direction. However, the headline NFP number might lose its place to the US ISM Non-Manufacturing PMI due to the timing of the survey in relation to the virus outbreak in the US. “We estimate nonfarm payrolls at -200k, with the unemployment rate increasing to 3.8% from 3.5% in February. Payrolls will probably be down by several million in April. Separately, we expect the non-manufacturing ISM index to fall by much more—from a higher level—than the manufacturing index on Friday. We forecast a decline to 43.0 from 57.3 in February. The recent surge in claims highlights the extent to which COVID-19 is affecting services industries,” said TD Securities.

Technical analysis

A descending trend line from March 09, currently around $1,620, seems to cap the metal’s near-term advances. Though, sellers will wait for entry unless prices slip below a short-term rising support line near $1,595.