Building on Friday’s momentum, gold prices are starting the week on a strong note and are pushing back to within striking distance of critical resistance at $1,800 an ounce. Gold is up over $1756 on the day and at that level it would be the highest close since 2012.
August gold futures last traded at $1,771.70 an ounce, up 1% on the day. According to market analysts, gold is getting a boost Sunday evening as investors start to question the health of the global economic recovery as the COVID-19 pandemic continues to spread unchecked, particularly in the U.S.
“While social distancing during March and April helped slow the spread, re-opening activities in a number of states – most notably Arizona, Alabama, Arkansas, South Carolina, North Carolina, Florida and Texas – have coincided with a wave of infections that may be spreading further south and west relative to the early affected states. In that sense, the recent increase in cases represents a “rolling,” as opposed to a second, wave of COVID-19 in the U.S.,” said economists from Nomura in a report late Friday.
However, although bullish sentiment is strong in the gold market, some analysts are warning that the precious metal might not have enough steam to break through its months-long trading range.
Marc Chandler, chief market strategist with Bannockburn Global Forex, warned that momentum indicators show that investors should use caution at current levels. He noted that in the 2008 Financial Crisis, gold didn’t break out to new highs until the fourth quarter of 2009.
“Recall in mid-May, gold pushed to $1765 and reversed lower. The MACD is neutral, and the Slow Stochastic looks poised to turn lower. That said, many are looking for a move to $1800,” he said in a research note Sunday.
Chris Weston, head of research at Pepperstone, also highlighted neutral sentiment and positioning in the gold market; however, he added that the precious metal is back on investor’s radar after prices pushed back above $1,750 an ounce.