Gold climbed above $1790 for the first time since 2012, after recovering from being negative on the day to take out last week’s high. The metal has now paved the way for a potential run towards the next psychological handle of $1800 next, before deciding on its next move.
Gold has been rising due above all to falling yields as governments and central banks stepped up their response to the pandemic. Investors have also been piling into safe-haven gold due to worries about the growing disconnect between stocks – especially US technology names – and the real economy. With US stock market valuations being sky-high while the economy is in a deep recession, there is a growing risk that we are getting closer and closer to the time the bubble will eventually pop, which, if central banks allow, will surely support haven assets. Providing gold additional support is the depreciating US dollar amid a very dovish Federal Reserve.
This is how the daily chart of gold looks like now:
Source: TradingView.com and ThinkMarkets
Following its gains, gold has now tested the 2012 high of just under $1796, above which there is the psychologically-important $1800 handle, then thin air until the 2011 high at $1920. The latter would be the ultimate bullish objective in the medium-term. But in the short-term we may see some profit-taking here and there, possibly providing further dip-buying opportunities rather than going up in a straight line. Ultimately, however, the dips are likely to be supported until and unless something fundamentally changes. So, the metal remains supported from both a technical and fundamental point of view.
The key short-term support to watch now is Monday’s high at $1787, below which there are a number of intraday support levels such as $1780 and $1775. However, if Monday’s low at $1756 breaks, then this would mark the end of the bullish price structure, potentially paving the way for a sharp correction.