Gold prices retreated from nearly one-month highs around $1,671 on Tuesday amid profit-taking at attractive levels. Today, the bullion sees a mild upside bias but struggles to regain ground, having settled around $1,650. Despite the recent retreat, the prices remain elevated as risk sentiment is still unstable amid the ongoing coronavirus outbreak.
The greenback switched into a recovery mode after a brief downside correction seen yesterday. Investor sentiment has deteriorated again following a relief rally, as the death toll from the virus keeps climbing across the globe. According to the latest news, Spain reported the highest daily increase in coronavirus cases and deaths in four days.
Meanwhile, Germany’s leading research institutes expect the country’s economy to shrink by nearly 10% in the second quarter. Overnight, EU finance ministers failed to agree in talks on more support for their coronavirus-hit economies, which added to the negative pressure in stock markets.
Against this backdrop, investors resumed selling in risky assets on Wednesday, which in turn helped to prevent further losses in the gold market. Should the precious metal struggle to keep gains and turn negative again, the $1,640 area will act as the immediate support. In a wider picture, the $1,600 figure remains the key obstacle for bears. On the upside, the futures need to make a clear break above the $1,670 region so that to target $1,700.
The bullish impetus in gold prices will likely be limited now, as dollar demand still looks robust due to its safe-haven status. Later today, the Federal reserve reveals the minutes of its last policy meeting. Should the central bank express pessimism over the consequences of the virus pandemic, the greenback may trim gains, which in turn could drive the yellow metal higher. In the longer term, gold may benefit from the upcoming global recession which seems imminent amid the virus outbreak globally. As such, the bullion may yet challenge record highs down the road.