Gold prices resumed the ascent after two days of a bearish correction from fresh multi-year highs, witnessed amid partial profit-taking following a jump on a broad-based risk aversion at the start of the week. On Wednesday, the bullion has settled around $1,660 after a bounce from yesterday’s local lows at $1,640. Earlier in the week, the yellow metal failed to confirm a break above $1,700 as the panic has waned subsequently.

Risk aversion has abated somewhat, suggesting the upside potential in gold prices may be limited in the near term. This is mainly due to a series of measures being taken by the authorities across the globe. In particular, following Federal Reserve’s suit, the Bank of England announced an emergency rate cut today. Furthermore, Carney said that fiscal policy is needed as a complement to the central bank’s action. Meanwhile, the Japanese government is reportedly compiling an emergency economic package next month, in an effort to counteract the impact of the coronavirus outbreak. 

These steps and expectations of further stimulus measures globally are positive for investor sentiment, but the effect from the measures will be short-lived and limited in the context of market recovery as long as the coronavirus spread continues. For gold prices, it means that the upside potential persists as risk aversion may reemerge at any point and fuel demand for safe-haven assets again. In other words, the precious metal may yet make a decisive break above the $1,700 level in the medium term if the virus outbreak continues to disturb investors and add to concerns over a global recession. 

From the technical point of view, gold needs to hold above the $1,630 local support so that not to derail the $1,600 handle. In a wider picture, the 100- and 200-daily moving averages are acting as resistance levels. At this stage, the prices are far above these MAs, and the background remains bullish in the weekly timeframes despite the current retreat. In the immediate term, the yellow metal faces resistance around $1,680. Once above, the $1,700 figure will come back in focus. 


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