Gold prices remain elevated at the end of the trading week, clinging to multi-year highs amid the prevailing safe-haven demand due to the ongoing coronavirus outbreak. Following a two-day rally, the bullion is trading in a flat manner on Friday as dollar demand has picked up slightly, sending the common currency to fresh one-month lows.
Upside drivers for gold remain in place. Among them are the lingering concerns over the economic impact of the coronavirus pandemic, rising geopolitical tensions in the Middle East, worries about energy demand, recession risks, rising coronavirus cases, etc. In other words, the precious metal retains its bullish potential in the longer run despite the overbought conditions.
At this stage, dollar demand could limit the upside impetus in gold prices in the near term. On the other hand, the yellow metal attracts demand on dips, which is a bullish sign as well as the incoming data from major countries, highlighting the extent of economic damage caused by the pandemic. According to the latest news, Gilead Sciences’ antiviral drug remdesivier failed to help patients in the initial first clinical trial, which added to a cautious and pessimistic tone in the markets on Friday.
From the technical point of view, the bullion needs to make a clear break above the $1,738 handle in order to challenge seven-year highs around $1,747. To do this, a decisive break above $1,730 is needed. Should investors resume profit-taking, gold prices may retreat from the current levels and challenge the $1,720 support zone in the short term.
In the four-hour charts, the technical picture remains positive, with the 100-SMA continuing to point upwards. Meanwhile, the daily RSI has turned flat marginally above the neutral territory, suggesting the prices may retreat before another rally takes place. In short, despite some signs of a potential downside correction in the immediate term, the general picture for safe-haven precious metal remains upbeat. Once above the mentioned multi-year highs, the bullion may exceed the $1,750 region.