Gold prices are trading marginally lower on Tuesday, oscillating around the $1,800 psychological level. Yesterday, the bullion finished slightly higher, creating a long upper wick on the intraday timeframes, suggesting the upside potential is limited at this stage.
It looks like the yellow metal decided to take a breath before another bull run as the corrective impetus looks too modest to bet on deeper losses in the short term. The prices now need to hold above the $1,785 intermediate support in order to avoid more aggressive profit-taking in the days to come.
In a wider picture, the outlook for gold prices remains upbeat as risk sentiment is still fragile, with global stocks being vulnerable to further losses amid several risk factors from the coronavirus developments to US-China tensions. Of note, California Governor re-imposed restrictions yesterday in an effort to tamp down a surge of coronavirus infections. The situation in this state is clouding economic growth prospects for the country as a whole. According to the latest data from John Hopkins University, there are 3,364,547 confirmed cases and 135,615 deaths in the United States.
On the geopolitical front, Washington on Monday rejected China’s disputed claims to offshore resources in most of the South China Sea. In turn, Beijing criticized the move as it unnecessarily provokes tension in the region.
Further deterioration in relations between the world’s two largest economies and rising coronavirus cases could add to the selling pressure surrounding high-yielding assets and thus fuel the safe-haven gold demand in the short- to medium term. The upcoming earnings season could also affect dynamics in gold prices – upbeat results may cap demand for the metal.
From the technical point of view, the $1,800 handle remains in focus at the moment, and a daily close below this level will represent some deterioration in the immediate technical picture for the precious metal. On the upside, the intermediate hurdle for bulls arrives around $1,810 while the key target comes at $1,820.
