Technical Chart of the day: Monthly XAUUSD Gold - Bullish
Gold hit a seven-year high last night extending the rally to six days as concerns over the coronavirus re-emerged that the pandemic was spreading further afield from Asia. Japan and Korea reported their first fatality from the virus as infections increase. The Chinese announced that factories and firms in the Hubei province would remain close until March 10. As concerns about corporate earnings in the US and recession fears in Japan came back to haunt investors, many turned to Gold. There had also been speculation that the Fed may consider easing monetary policy towards the end of the year sending the precious metal further high up. Remarkably, the strength in the US Dollar Index did not dampen Gold’s strength.
Covid-19 has been supportive for Gold as a safe-haven asset while the spread of the pandemic remains large. Financial uncertainty combined by low interest rates are bolstering Gold investment demand. Net Gold purchases by Central Banks remain robust. Momentum and speculative positioning keep gold prices elevated. On the other hand, expectations of weaker economic growth in large consumers like India and China may result in weaker demand and act as a damper on prices.
Market View: The path of least resistance is up and fundamentals remain bullish as Gold hits new highs. Consolidation is expected to take place just above the $1600 level as technical indicators show overbought conditions before Gold makes further gains. Gold support is at 1600 and top side resistance is the psychological level of 1650.