Following the initial rally, gold prices turned flat during the European session on Monday, staying close to multi-year highs amid a cautious approach by investors as the number of coronavirus cases surged in the United States, China, and Brazil.
Over the weekend, the World Health Organization reported that global coronavirus cases rose a record 183,020 in 24 hours while Apple decided to temporarily shut some US stores as virus cases continue to climb in several states.
The precious metal jumped to $1,758 in Asia but has retreated to the flat-line since then. Despite the correction, the bullion remains elevated and retains its bullish potential, especially amid growing concerns over a second wave of coronavirus pandemic. Risk sentiment has improved somehow in recent trading but financial markets remain vulnerable as virus-related developments persist.
On the positive side, Goldman Sachs forecasts another rally in gold prices to S$2,000 per ounce within the next 12 months amid the lingering concerns and weaker dollar. The bank updated its three-month gold price forecast to $1,800.
On the other hand, signs of easing trade tensions between the United States and China help to ease investor concerns as well as some upbeat economic data out of major economies, adding to signals of the economic recovery from the pandemic crisis. Stimulus measures from major central banks also support market sentiment, partly compensating for worries about the virus.
The yellow metal could retreat in the immediate term before buyers reemerge at more attractive levels and push the prices to fresh multi-year highs. In this scenario, the bullion may correct lower to the $1,700 handle where significant psychological support arrives.
On the upside, the bullion needs to make a decisive break above the $1,750 region so that to challenge multi-year highs registered a month ago around $1,765. If above this level, gold prices could target the $1,800 handle in the longer term.