Despite yesterday’s bounce amid a wide-spread risk aversion, gold prices struggle to keep the upside momentum and stage a more sustainable recovery, with the bullion staying under the $1,600 psychological level. Last month, the future plunged to 2020 lows and staged a reversal afterward but the prices failed to confirm a break above $1,640 last week and had to retreat as a result.
The mixed dynamics in gold prices is reflecting the general uncertainty in the global financial markets. On the one hand, the prevailing risk aversion helps the precious metal to stay afloat, with investors preferring to sell stocks on bullish attempts as long as the coronavirus continues to spread across the countries. On the other hand, some market participants get rid of gold futures as they tend to pile up cash due to the lingering and growing concerns over a deep global recession.
In the longer run, once the pandemic pick is over, investors will gradually return to high-yielding assets buying, which will likely result in a relatively strong downside pressure for gold. But let’s not forget that the economic consequences of the virus outbreak will be felt for a long time, and it will take decisive efforts by global authorities to ease the economic collapse. In other words, the yellow metal may receive a decent boost once the economy starts to show more pronounced signs of weakness.
From the technical point of view, the key level arrives at $1,600. As long as the prices stay below this barrier, the picture in the daily charts remains bearish. On the downside, the bullion needs to hold above the 100-DMA at $1,545 should the selling pressure intensify in the days to come. In the hourly charts, a break above the 200-SMA around $1,593 is needed for a more pronounced recovery. The weekly timeframes show that the sentiment towards the precious metal remains unstable, with investors continuing to hesitate amid the heightened global uncertainty.