Gold prices turned negative on Friday as risk sentiment improved after yesterday’s short-lived correction. Earlier this week, the futures derailed the $1,700 psychological level and struggle to make a sustainable rebound since then. Ta the writing, the precious metal was changing hands around $1,707, off the daily highs in the $1,716 area.
Gold prices lack the upside momentum despite a broad-based dollar weakness seen this week. Investors continue to express optimism over the outlook for the global economic recovery from the coronavirus pandemic while central banks’ stimulus measures add to bullishness in the global financial markets. It is not surprising that against this backdrop, the safe-haven gold demand has been waning gradually.
Still, despite the yellow metal struggles to regain sustainable upside momentum, the longer-term outlook for the bullion remains positive. First, there is heightened uncertainty surrounding the US-China trade relations, now also in the context of the Hong Kong issues. Moreover, there is a risk of another escalation in tensions between the world’s two largest economies. Second, the recovery process in the global economy could be hard and prolonged, with corporate results will yet reflect the consequences of the coronavirus crisis. Third, there is a risk of the second wave of the pandemic.
As such, gold prices may yet gain and register fresh long-term highs this year as there are still too many risk factors globally. Meanwhile, in the immediate term, the futures could suffer a deeper pullback before the buyers send the prices above $1,750.
On the weekly timeframes, the precious metal has been retreating for the third week in a row. On the downside, significant support arrives at $1,680. A break below this level could attract additional sellers to the market. Now, the bullion needs to cling to the $1,700 figure in order to avoid a more painful retreat. Of note, the prices may regain some ground by the end of the day if the US jobs report disappoints as dismal figures could put risky assets under the selling pressure at the end of the week.