Gold prices were rejected from fresh May highs above $1,70 on Friday and have been struggling to regain the upside momentum since then. The precious metal dipped below the $1,700 psychological handle on Monday and has settled just below this level.
Risk sentiment looks mixed at the start of the week as investors prefer a cautious tone. Most global stocks failed to preserve earlier gains as the disappointing economic data out of major countries continue to make investors worried about the outlook for the global economy. This cautious mood helps to ease the downside pressure surrounding the bullion. On the other hand, some countries continue to gradually ease restrictions and lockdowns imposed amid the coronavirus outbreak.
At this stage, gold prices may spend some time in a consolidation mode before traders decide on the further direction. The tone in the oil market may affect the general market sentiment, with Brent crude trying to hold above the $30 psychological level on Monday.
From the technical point of view, the bullion needs to firmly regain the $1,700 level in order to retarget the mentioned local highs. On the downside, the initial meaningful support arrives around $1,680. As long as the prices are holding above this level, the bearish risks are limited.
In a wider picture, the yellow metal will likely continue its bullish attempts as the global economy will further struggle which means risky assets will be vulnerable to further losses along with oil prices that remain capped by a gloomy outlook for energy demand amid the ongoing coronavirus pandemic.
As such, gold will likely settle above $1,700 and may target fresh long term highs in the longer term. a break above $1,720 will open the way towards $1,740 and higher despite the daily RSI is pointing south at this stage. Of note, the metal remains well above the 100- and 200-daily moving averages, which is also pointing to its bullishness. On the weekly timeframes, the prices remain elevated despite the upside momentum has waned somewhat since reaching a high around $1,747 in mid-April.