It is a well-known rule of thumb that the safe haven asset class which includes gold typically trades with an inverse correlation to equities. There is an exception to that rule, and that is when the Federal Reserve eases their monetary policy with low rates and the accumulation of assets on their balance sheet to provide liquidity.

Twice each year the chairman of the Federal Reserve meets with the Congress, as well as the Senate. During these two meetings he delivers his outlook on the economy along with some insights as to the upcoming monetary policy.

Since February 5 when gold hit its lowest trading point since January 23, the key difference was that last Wednesdays low was followed by a green candle. Now, for the fourth consecutive day gold has traded with consistent higher highs, and consistent higher lows.

For the last five consecutive days the U.S. dollar has gained in strength. Over the last three consecutive days gold has been able to overcome dollar strength and close in positive territory.

As we saw yesterday, gold prices are trading moderately higher, even with a stronger U.S. dollar. Currently the most active April contract is up $7.60 (+.49%), and fixed at $1570.40. We have seen gold move moderately higher now for the second consecutive day, despite the dollar index currently up 2/10 of a percent and fixed at 98.355.

Gold prices recovered modestly today, after dropping by double digits yesterday. Although gold prices were tempered by dollar strength both gold futures and spot prices managed to eke out a small gain on the day.

Strong equity performance globally resulted in a major selloff in gold. The global rally in equities began last night in China. The underlying factor was action by China’s central bank. The People’s Bank of China (PBC) added huge amounts of capital last night through open market operations in attempts to offset the lack of confidence because of the coronavirus outbreak.

On Sunday, February 2, China’s National Health Commission released its latest figures of the novel coronavirus. Their latest figures released acknowledged that there have been 17,205 confirmed cases to date in China, with the death toll rising above 360.

Today the markets reacted fearfully to the ongoing coronavirus outbreak resulting in deep declines U.S. equity indexes, while being highly supportive of the safe haven asset group including gold and silver. Although it is believed that the coronavirus is much less deadly than SARS, it is likely more contagious because of that fact.

Yesterday the Federal Reserve held its first FOMC meeting for the new year, and the new decade. Following the conclusion and the release of this month’s statement it became immediately clear that there were no major changes to their current monetary policy. In fact, there were only a few words that were changed in this month statement when compared to the last FOMC statement.