In a wider picture, the yellow metal could regain the ground and resume its rally toward fresh all-time highs as there are still too many risk factors
Gold prices finished last week in the red, retaining a slight bearish bias on Monday. The bullion failed to hold above the $1.940 area earlier in the day and corrected under the $1,930 figure in recent trading as dollar demand has picked up again.
The prices briefly dipped in a knee-jerk reaction to Friday’s US jobs report as the unemployment rate declined unexpectedly and came in much better than anticipated. However, the futures managed to recoup losses quickly as the overall outlook for the economic recovery remained uncertain.
Following a strong rejection from the levels marginally below $2,000 last week, the precious metal has been under the selling pressure that could intensify in the short term if the coronavirus-related developments continue to improve gradually. Should the downside pressure surrounding the bullion persist, the prices may challenge the $1,900 handle for the first time since August 12. As long as gold prices hold above this key local support, bearish risks are limited.
In a wider picture, the yellow metal could regain the ground and resume its rally toward fresh all-time highs as there are still too many risk factors that could drive demand for safe-haven assets in the medium- to long-term perspective. Among one of the most outstanding risks is another escalation in the US-China tensions.
By the way, Washington is reportedly considering blacklisting Semiconductor Manufacturing International Corporation, China’s largest chipmaker. In turn, China said on Monday that the United States authorities are blatantly bullying Chinese companies. Considering rising uncertainty on this front, safe-haven demand could yet pick up in the days to come should the situation deteriorate further.
In other words, the bullion may extend the current correction before a reversal takes place. However, a dip below the mentioned $1,900 level may bring deeper losses as profit-taking could intensify in this scenario. Anyway, the longer-term bullish outlook for the precious metal remains intact so far.