Gold prices rallied to three-week highs around $1,738 even as risk sentiment has improved at the end of the trading week. The bullion has been rising for the fourth day in a row, and it looks like the precious metal is about to make a breakout soon.
Investor sentiment looks positive today as markets are cheering upbeat data out of China, where industrial production exceeded expectations in April. A rally in the oil market added to the bullish tone in the global financial markets amid further signs of contraction in global supplies after Saudi Arabia announced a cut in its oil exports to Asia.
On the other hand, concerns over the coronavirus-related developments continue to unnerve global investors. Besides, trade tensions between the US and China curb market optimism these days. Relations between the two world’s largest economies have deteriorated overnight after the US President Donald Trump said he has no interest in speaking to President Xi Jinping right now. Furthermore, the incoming economic data out of major countries continue to fuel concerns over a deep and prolonged recession.
Against this backdrop, the safe-haven gold demand persists as investors keep a cautious tone as the fundamental picture still leaves much to be desired globally. Moreover, the current rally in risky assets looks overdone as there are no visible improvements both on the economic and the geopolitical fronts, while the coronavirus pandemic continues.
From the technical point of view, the yellow metal may pause its rally and see a pullback before another rally to fresh highs takes place. After climbing to the above-mentioned daily tops, the bullion retreated and is changing hands marginally above the $1,732 figure at the time of writing. A dip below $1,730 may attract some profit-taking in the short term. However, the downside risks are still limited for gold in a wider picture, and the path of least resistance remains to the upside.