Gold prices spiked to fresh multi-year highs on Tuesday, having extended the rally to the levels just shy of $1,728. The precious metal remains within a firm bullish trend since mid-March when the prices bounced from November lows around $1,450.
Despite risk sentiment has improved somewhat today, and most global stocks turned positive, gold demand persists as investors continue to express worries amid the lingering risks related to the coronavirus outbreak, including the threat of a deep crisis across the globe. The local optimism in the markets is due to better-than-expected Chinese trade data while the overall sentiment remains relatively cautious.
As for the latest news, Spain reported more than 3,000 new coronavirus cases over the past 24 hours. In Germany, RKI says that the country should maintain a two-week quarantine period for travelers. Meanwhile, the French finance minister warned that the country’s GDP will contract by 8% this year. As long as similar news headlines emerge, upside risks for safe-haven gold will persist.
Moreover, the longer-term outlook for the yellow metal remains bullish as the economy is yet to overcome all the consequences from the global outbreak that may send many countries into a prolonged and deep recession.
From the technical point of view, the bullion can pause after a rally that took the prices to the highest levels since November 2012. However, the possible retreat will likely be limited at this stage. On the other hand, should more positive news on coronavirus start to emerge, risk sentiment may improve and thus fuel a deeper bearish correction in gold prices amid profit-taking.
On the upside, the next target arrives at $1,730. Once above this level, the precious metal may accelerate the ascent toward $1,770 in the longer term. Now, the prices need to hold above the $1,700 key support area in order to avoid a more aggressive correction in the short term. The daily RSI is trending towards the overbought territory, suggesting the bulls may be getting out of steam already.