- Tensions between the US and China weighed on the market’s mood.
- Central banks keep pumping liquidity as Q2 growth figures point to a steeper downturn.
- Spot gold set to extend its gains beyond a multi-year high of 1,765.19.
Gold prices have reached fresh multi-year highs this week, with spot hitting $ 1,765.19 a troy ounce. Despite ending the week in the red, the bright metal holds on to its bullish potential, backed by renewed tensions between the US and China, and central bankers keeping the stimulus tap open.
Optimism surged at the beginning of the week amid news that Moderna pharmaceutic’s test on its vaccine gave positive results on a small sample. The company entered a new phase of testing and said it could have a vaccine by year-end. The Moderna vaccine is the most advanced one, but there are other companies in different stages of testing. Economic reopenings also lifted the mood, although concerns over a second wave on contagions partially offset the positive headlines.
Central banks and coronavirus
The FOMC released the Minutes of its latest meeting this week, and while the document didn’t bring shocking news, clearly indicated that policymakers are willing to use any available tool to support the economy through the pandemic, except negative rates. The BOE, on the other hand, had put them on the table. Meanwhile, the BOJ announced a 30 trillion yen program to support small and medium-sized companies.
Tensions between the US and China escalated as the week went by, denting the market’s sentiment. The US launched an investigation on the origins of COVID-19 backed, among others by Australia. It also menaced to take measures against the Chinese government’s decision to impose national security legislation on Hong Kong, triggering a response from US President Trump, who said that the country would “address that issue very strongly.”
In this scenario, that’s meant to persist, gold will continue to attract investors.
Data released these last few days indicate that the economic downturn will steepen into Q2. A bounce in manufacturing output and the services sector from record lows fell short of indicating some kind of growth. The number of unemployed people n the US continued to increase by the millions, and inflation continues to fall.
The US calendar will have little to offer until Thursday when the country will release April Durable Goods Orders and the first revision of Q1 GDP.
Spot Gold Technical Outlook
Spot gold recovered this Friday after falling to a weekly low of 1,717.17 on Thursday. Now trading around 1,735, it has posted a higher high and a higher low for a second consecutive week, a sign that the bullish pressure is still high.
In the weekly chart, technical readings maintain the risk skewed to the upside, as the metal stands above all of its moving averages, and with the 20 SMA maintaining its upward slope far above the larger ones. Technical indicators lack directional strength, but remain well into positive ground and close to overbought levels.
In the daily chart, the metal offers a neutral-to-bullish stance. The pair bottomed near a now flat 20 DMA, while technical indicators have turned flat within positive levels. The 100 and 200 SMA, maintain their strong bullish slopes far below the current level.
The 1,745 level comes as the immediate resistance, as spot stalled its intraday rallies several times in the last few weeks. Beyond it, the next relevant level is 1,753.90 ahead of the mentioned multi-year high of 1,765.19. Beyond it, bulls will try to extend its run toward 1,800.00. 1,722 is the immediate support ahead of 1,715, where the metal has its daily 20 SMA. Below it, it can test the 1,690 price zone.
Gold Sentiment Poll
The FXStreet Forecast Poll suggests that the metal may consolidate near its highs this upcoming week, as bulls and bears are balanced. In the monthly and quarterly perspectives, bears are a majority, although on average, gold is seen holding above $1,700.00 a troy ounce.
The Overview chart shows that the range of possible targets is quite limited in the short-term, widening in the monthly view. Nevertheless, those seeing gold below 1,600 is quite a few, while the number of experts looking for 1,800 continues to increase. Moving averages have lost bullish potential in the short-term, but there are no signs of exhausting buying interest.
Related Forecasts:
EUR/USD Forecast: Feel lost? So do central bankers
AUD/USD Forecast: Relations with China reversed the rally, can an improvement revive it?
GBP/USD Forecast: Boris's Brexit and lockdown decisions stand out after the vaccine-driven rally
Information on these pages contains forward-looking statements that involve risks and uncertainties. Markets and instruments profiled on this page are for informational purposes only and should not in any way come across as a recommendation to buy or sell in these assets. You should do your own thorough research before making any investment decisions. FXStreet does not in any way guarantee that this information is free from mistakes, errors, or material misstatements. It also does not guarantee that this information is of a timely nature. Investing in Open Markets involves a great deal of risk, including the loss of all or a portion of your investment, as well as emotional distress. All risks, losses and costs associated with investing, including total loss of principal, are your responsibility. The views and opinions expressed in this article are those of the authors and do not necessarily reflect the official policy or position of FXStreet nor its advertisers. The author will not be held responsible for information that is found at the end of links posted on this page.
If not otherwise explicitly mentioned in the body of the article, at the time of writing, the author has no position in any stock mentioned in this article and no business relationship with any company mentioned. The author has not received compensation for writing this article, other than from FXStreet.
FXStreet and the author do not provide personalized recommendations. The author makes no representations as to the accuracy, completeness, or suitability of this information. FXStreet and the author will not be liable for any errors, omissions or any losses, injuries or damages arising from this information and its display or use. Errors and omissions excepted.
The author and FXStreet are not registered investment advisors and nothing in this article is intended to be investment advice.
Recommended Content
Editors’ Picks
EUR/USD retreats toward 1.0850 despite weak US employment data
EUR/USD loses its traction and declines toward 1.0850 after testing 1.0900 earlier in the session. Because Nonfarm Payrolls data for October missed the market expectation by a wide margin due to hurricanes and strikes, the US Dollar manages to hold its ground.
GBP/USD climbs above 1.2950, looks to end week little changed
GBP/USD benefits from the improving risk mood and trades in positive territory above 1.2950 in the American session on Friday as markets ignore the weak labor market data from the US. The pair remains on track to end the week flat.
Gold clings to small gains near $2,750 after US data
Gold clings to marginal recovery gains and trades slightly above $2,750. The 10-year US Treasury bond yield struggles to push higher after the dismal October jobs report and weaker-than-expected PMI data from the US, helping XAU/USD keep it footing.
Bitcoin Weekly Forecast: Run toward fresh all-time high hinges on US presidential election results
Bitcoin could experience a price pullback in the next few days ahead of the US presidential election, analysts say, an event that will be key to determining whether and how the crypto class will be regulated in the years to come.
Bank of Japan holds rates steady amid signs of modest GDP growth
Monthly industrial production results have been mixed but generally indicate a modest recovery in third-quarter GDP. Clear guidance from the Bank of Japan remains elusive, with each upcoming meeting being pivotal.
Best Forex Brokers with Low Spreads
VERIFIED Low spreads are crucial for reducing trading costs. Explore top Forex brokers offering competitive spreads and high leverage. Compare options for EUR/USD, GBP/USD, USD/JPY, and Gold.