Gold held above key support at $1,800 per ounce in mid-July and eyed further potential gains due to its safe-haven appeal.
Gold’s potential to rise further is due to fears over a possible second wave of coronavirus cases; expectations for more monetary stimulus to kickstart economies, and deteriorating U.S.-China relations.
Donald Trump signed an executive order ending preferential treatment for Hong Kong. China said it would impose retaliatory sanctions on the United States.
Some commentators see prospects for gold to test a multi-year peak around $1,825 in the coming weeks if investors continue to seek safety in the yellow metal.
“As long as prices remain above the $1,800 level, gold has the potential to test $1,815 and a fresh multi-year high at $1,825, respectively,” FXTM analyst Lukman Otunuga said in a note.
“Should $1,800 prove to be unreliable support, the precious metal may experience a technical correction back towards the $1,765-$1,780 regions before bulls gather fresh momentum.”
Consistently strong investor flows into gold-backed exchange-traded funds (ETFs) in recent months have been a barometer of upside potential in bullion prices.
Gold was at $1,811.81 per ounce, up 0.08 percent, on July 15.
The outlook for the value of gold savings in sterling terms appears to be resilient amidst the current economic turmoil.
This is due to forecasts of a soft pound against the dollar, battered by struggling Brexit trade talks between the UK and the EU, and slower than expected GDP growth in May that will add to calls for further stimulus measures by the Bank of England, possibly leading eventually towards negative interest rates.
If buoyant U.S. equities correct downwards, pressured by dismal second-quarter corporate results due to COVID-19, gold prices could see more gains.
“If gold and silver succeed in retaining their respective $1,800 (per ounce) and $19 (per ounce) levels they could well both go on to better levels in the weeks and months ahead,” wrote Lawrie Williams, precious metals commentator for bullion dealer Sharps Pixley.
“We still think that booming general equity prices are due for a major correction as the true COVID-19 effect on the global economy is better understood by the general public,” he added.
“We reckon that overall gold and silver will both continue to outperform other commodities and the major equity indexes as the year progresses.”
While most of the arguments appear to be constructive for gold prices, any rapid progress towards securing a vaccine against COVID-19 could trigger a selloff of bullion, analysts say.
We use cookies to ensure that we give you the best experience on our website. If you continue to use this site we will assume that you are happy with it.AcceptDismissRead more
